Are you looking for ways to get your startup off the ground? Read on to find out if an angel investor may be a good fit for your business.
Raising funds for your business is important to getting your startup off the ground, and this can be achieved with the help of an angel investor.
An angel investor, also known as a private investor, seed investor, or angel funder, is a person with a high net worth who can invest as an individual to financially back small businesses, entrepreneurs, and naturally, startups. Often, angel investors fund companies in exchange for ownership equity, and can make a one-time investment or provide ongoing incoming funds. Additionally, it is common to find an angel investor close to home. Look at friends and family who take an interest in your business who might want to be involved with funding.
Oftentimes, angel investments are a primary source of funding for startups, as they are more appealing than loans considering the lack of interest rates. Angel investors provide the tools for innovation and thus, economic growth. It is worth noting that investing in a startup can be risky, and thus often do not make up more than 10% of the average angel investor’s portfolio.
There are several ways to find an angel investor for your startup, be it through pre-existing connections, networking at local business events, or pitching your business directly to a group of angel investors. Here are some tips to get started.
It is important to discover whether or not you are ready for an angel investor to help fund your startup. Here are some things you should take into consideration when beginning your search.
Return on Investment
Firstly, it must be determined whether you are willing to offer ownership or revenue from your company to your investor. Secondly, you must be able to demonstrate that your company will make significant returns on investments (ROI). Map out a detailed financial plan that demonstrates you have short and long term goals that will make the best use of an investment.
Finding the Right Angel Investor
When looking for an angel investor, it is important to also consider that they might be a mentor, or someone with experience in the field you are starting up in. To draw in possible investors, consider the following.
According to Jason Calcanis, a successful angel investor, having a minimum viable product is an important factor in attracting funding. This is a version of a product that has enough features to be used and tested by early users, so that they can give feedback for future product development.
Having a strong monetisation strategy is also key – attracting investors will be much easier if you have a solid business plan to generate revenue. Make sure to lay out the local market of your product or service, and network to ensure a loyal customer base.
Furthermore, you should be willing to take advice from your angel investor if it is called for. They should be someone with previous entrepreneurial experience who can mentor you and take your company to the next level. Their familiarity in the field you are working in will be a great asset.
Pitch Your Business
Lastly, prepare a pitch that includes an airtight business plan, market projections, and your minimum viable product or service. This is an extremely important step to take, because if you are not 100% confident in your business, neither will the investors. Find more tips on preparing the perfect pitch here.
Grow Your Network
Looking close to home for angel investors is a good strategy, as you may already know some friends and family members who are actively looking to invest in a good business idea. In addition, make sure to attend events catered to local businesses and the startup community.
The Importance of Networking
Networking, as with most business ventures, is extremely important. Usually, a referral is needed to be a viable investment opportunity for an angel investor. When looking for someone to fund your project, focus on business owners who are already active in the community you are looking to participate in. Join business and trade organisations, and attend expos and fairs. Making the right connections could be the deciding factor of whether or not you successfully find an angel investor.
Angel Investor Groups
Lastly, there are services and groups that bring together angel investors who are looking to fund small businesses and startups. For example, Calcanis launched the Open Angel Forum in 2009, a platform that enables early-stage startup companies to seek funding through presentations to prospective angel investors. Now, Calcanis continues this journey via LAUNCH, a group that invests in startups to fund and accelerate business innovation. Other angel investor groups include the Angel Capital Association, the Angel Resource Institute, and Gust.