An angel investor also known as an angel, business angel or informal investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
Angel investors are estimated to provide 90 percent of all seed and start-up capital. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital. If you make the right introduction, you will land an angel sooner than you think.
Angel investors are located just about everywhere. But they are generally hard to find. Here are 7 actionable steps to actively and creatively raise money for your new business.
1. Don’t settle for any angel, find an ideal investor.
In as much as it’s difficult to find an investor for your startup, don’t start your search looking for any investor. You are better off with an investor who knows your industry, understands your business and it’s well connected to take your business to the next level.
2. The best angels you will find are the ones who know you personally.
The steps to a successful fund raising takes time but you can significantly increase your chances of securing funds if you or your connections know a couple of investors. This is partly because they need to have confidence and trust in you to take a risk on you and your business.
Greater percentage of investors invest in people not ideas. Identify the people you want to engage and then see if you can get to them via your network using LinkedIn.
—Getting referred by someone with whom an angel investor has already worked with, is the easiest way of getting connected to him.
—We see 5 deals per day, 30 per week. All these deals are quality referrals from people we already know; we already either know the referrer or the entrepreneur.–Ron Conway (Legendary angel investor)
3. Give them a good reason to invest.
Investors get thousands of applications each month. They invest in startups by making informed decisions about the prospects of the startups.
—According to Ron Conway, 40 percent of his firm’s investments often fail.
You must be up to something significantly great to get the attention of a great angel investor. The most important thing is to give them a good reason why your startup is worth their attention, resources, partners and their money.
4. Investment resources
Search private equity websites, investment groups on LinkedIn and most importantly competitors’ sites. If you are looking for an investor in your industry, check out the about us pages of your closest competition, you may find their investors who are already interested in your niche.
–Create a good introduction of your team and business and find the best way to reach out to them. Cold emails may not be effective. Find a contact to make an introduction on your behalf.
—You could also find out from a professional venture capitalist if he or she is aware of an angel investor group who could be interested to invest in your startup.
—Find the right investment advisor, or member of your advisory board, and the “match-making” will happen.
–There are some good investment books out there to help, like “Attracting Capital from Angels”, by Brian Hill and Dee Power.
–Contact investment advisors for a free analysis and explanation of what options exist for you. Most of them are connected with lots of angel investors.
5. Look at the “Principle Shareholders” section of initial public offerings (IPO) prospectuses for companies in your niche. This will tell you who has cashed out big.
6. Get an invitation to present to a local angel group. Most won’t take cold calls, so you’ll need to wrangle a referral.
7. And finally, follow the angels.
Most angels offer great information on raising capital, angel investor insights, developing an elevator pitch etc. on their blogs, on Twitter and in various interviews. Follow them and find out about their connections who could also be investors.
Raising money is hard, but don’t get discouraged. Take every “no” you get as an opportunity to learn something and refine your idea. If you can’t get someone to say “yes”, figure out what you need to change or just go out and prove them wrong by bootstrapping your way to success.