Small businesses need capital to grow and while there are many ways for businesses to raise money, angel investors can be a good option for some.
What Are Angle Investors?
Typically, angel investors are wealthy, high net-worth individuals who invest their money into early stage and emerging businesses. While angel capital can sometimes come from family and friends, most angel investors are entrepreneurs themselves. In addition to funding, they may also bring some business expertise to the table.
Angel investors are different from venture capitalists that are funds that also invest in a portfolio of emerging businesses.
1. Make the Right Pitch
Your chances of connecting with the angel investor you need will be much better if you tailor your pitch. Investors, in general, need to understand your business, how it fulfills an unmet need, whether it has room to scale and have confidence in the management team. Your pitch should also have information on your business' financials, competitive landscape, as well as industry and regulatory challenges.
Remember, angel investors are putting in their money, so these fundamentals are even more crucial to them. Having said that, remember to keep the presentation and pitch professional, concise and comprehensive.
2. Look Close to Home
Many angel investors like to play an active role in the business they invest in, so they prefer to invest in businesses that are close to home.
Note
Many state and local governments, such as Delaware, offer tax incentives for angel investors who invest in local businesses.
So starting your search for an angel investor in your local community could be a first step towards meeting the right investment fit.
You can also start your research with an investor database, such as the one provided by CB Insights.Some colleges have angel investor communities that help support businesses owned by students, alumni or parents of students.
3. Take Every Opportunity to Network
In most cases, you need to be referred to an angel investor. So to find angel investors you need to get to know the right person (the one who can refer you to the angel investor you’re looking for), which means immersing yourself in your local business and social community.
Focus on business owners as these are the people who might be or become angel investors themselves or know an angel investor. Join business and trade organizations and regularly attend the meetings. Joining civic and community organizations are also great for networking. Attend trade fairs and events. Get your face and your name out there and meet as many people as possible.
4. Realize That Many Angels Don’t Fly Solo
While there are some angel investors who invest entirely on their own, many operate as part of an informal network or syndicate where they can pool their resources and share the risks.
Note
Check with the Business Development Center, Community Futures Office or Economic Development Centre where you live. There may be an active group of angel investors in your community.
5. Use the Connection Services Available on the Internet
You may be able to hook up with an angel investor through one of the websites that provides entrepreneur and angel investor matching. If nothing else, you can at least get your business proposal before a wider audience. Here's just a sampling to get you started:
- Angel Capital Association (ACA): The largest professional development organization for angels in the world, ACA boasts over 15,000 member accredited angel investors and over 250 angel groups and accredited platforms, making this website a great resource for finding angel investors.
- Angel Investment Network: Angel Investment Network gets you access to over 300,000 angel investors. It allows you to create and publish your pitch on its platform, after which interested investors can contact you and complete a transaction.
- AngelList: Launched in 2010, AngelList has been a part of early funding for some big name companies such as Uber. Today, it works to connect startup founders with different types of investors, including angel investors.
Note
These websites do not directly provide investor funding; what they offer is the chance to make the connection with angel investors that may be interested in what you're offering.
The Bottom Line
Finding an angel investor is not a particularly easy task, but the effort will really pay off when you find the angel investor who is willing to invest in your business. Besides providing the capital your business needs, the advice and know-how of an angel investor can be key to shaping your company’s success.
Frequently Asked Questions (FAQs)
How do I find angel investors online?
There are many platforms such as, Angel Capital Association, Angel Investment Network or AngelList, that help connect entrepreneurs with angel investors. Strong referrals could also help your case with angel investors, so consider leveraging the power of your social media connections, especially on LinkedIn.
Is it hard to find an angel investor?
Angel investors are wealthy people who invest their money into emerging businesses, either individually or by combining forces. Angel investors could be entrepreneurs themselves, which means they may have knowledge about the industry and local economy your business operates in. You would need to do your research, approach investors in the correct industry, network to get a referral and make a strong pitch in order to bring an angel investor on board.