Many aspiring startup owners often find themselves light on the capital needed to finance their operations. If you’re in such a position, you need to start searching for funding from other sources, and an angel investor is a great option to consider. These individuals boast a high net worth, meaning they can comfortably fund your startup, typically contributing tens to hundreds of thousands of dollars. In exchange for their investment, they get an equity stake in your company and prefer investing during the early stages to get high future returns.
But where should you start searching for an angel investor? Here’s a helpful guide by https://www.whatisup.io/ outlining the steps to follow during your search, hence getting the finances to fund your startup.
Know What You Want
You first need to have a clear idea of the exact kind of angel investor to approach before you even start your search. You must do this because there are different reasons besides financing that you may decide to approach an angel investor. Some of the qualities to look for in an angel investor before you even approach one include.
- An individual annual income that’s greater than $200,000 or joint annual income that exceeds $300,000.
- Their network is more than $1,000,000.
- They’re between 40 to 60 years old.
- Ready to invest up to $150,000 either by themselves or by pooling funds with other angel investors.
- Looking to invest for a period of 5 to 7 years.
- Has experience and success as an entrepreneur.
In addition, you may be looking for an angel investor who, in addition to their money, shares their expertise to help increase your company’s chances of success like marketing or has useful industry connections. With their mentorship, you get to avoid simple mistakes other startup entrepreneurs make, thereby guaranteeing your business greater survival chances. Therefore, make sure to understand your business needs, and this will guide you in your search for the right angel investor.
After identifying the preferred type of angel investor, the next step is to write a brief and concise business plan. With a high-quality business plan, you’ll be able to state specific key details that can be of help to you, including;
- Your startup’s objectives, business strategies, tactics, milestones, and financial prospects.
- Amount of money you’re requesting.
- Pinpoint the key points and numbers when making your pitch.
With a clear business plan, angel investors have a better idea of whether your startup is a worthwhile investment or not. In addition to your business plan, you also need to prepare yourself well by thinking of a catchy and exceptional pitch. This way, it’ll be a lot easier to convince the angel investors to fund your business because of its great team, superb ideas, and exceptional track record on implementing ideas. During your pitch, you should further emphasize other things, including your startup’s growth opportunities plus financial and market projections.
Start Your Search for Angel Investors
There are different settings where you can find angel investors, and it can also be someone you know. To start your search, you need to learn the different ways to connect with these investors, be it at a local development agency, local investment club, or through recommendations of a friend or family. It’s best to start your search locally because you can find one with something you have in common, for instance, working in the same industry or being from the same town or state.
You can also attend angel investor events that offer you an excellent opportunity to interact face to face with potential investors despite being competitive. Another option is to use sites such as FundersClub, AngelList, and SeedInvest, best known for linking startup owners with angel investors.
Build Your Network
Tracking down an angel investor isn’t a walk in the park. This is often the case because most of them keep a low profile to try and avoid constantly being requested for funding from aspiring entrepreneurs. Therefore, you shouldn’t expect to find one by simply looking in the streets. Instead, you need to network with as many people as possible in your social community and local businesses who can then direct you to an angel investor.
During your search, it’s best to direct your focus to business owners that are already active within the community. You also can attend business fairs, trade fairs, and events which give you a platform to interact with lots of other business persons. Establishing such connections determines whether you’ll land your targeted angel investor.
Research a Potential and Right Angel Investor
An angel investor is someone you’ll be in business with for the foreseeable future. Therefore, you need to know as much as possible about them before approaching them and pitching your business idea. Details you should find out include their motivation for investing and what they invest in.
Fortunately, knowing such details shouldn’t be that hard because most angel investors, be it, a group or individuals can easily be found on the internet. You should create time to learn all this to know certain key background details such as their industry experience, previous successes, speaking, and writing. In addition, find out the potential angel investor’s preferred mode of contact for the first meeting, be it through a business plan, a phone call, email, summary memo, among others.
Establish a Relationship
Once you find out that the angel investor is an ideal fit, establish strong relationships with them. Doing this will make them more inclined to the idea of investing in your startup. This also helps you know how to interact with them and determine how they’ll be part of your business. Some angel investors might opt to be a silent partner, while others, especially those with previous experience in your industry, might want to be your advisor. You need to iron this out before going any further to ensure a harmonious working relationship between you two.
Angel investors usually use their own money to fund your startup. Therefore, they need great convincing before they can invest their money with the hope that your venture is viable to earn them great returns in the future. This means you need to first prepare yourself adequately before approaching an angel investor, or else your attempts will end up failing. Fortunately, this guide has outlined guidelines on how you can find an angel investor willing to fund your startup business to get it off the ground.