Angel Investor Funding

An angel investor is generally a wealthy individual who is ready to provide capital or funds for a business start up in exchange for convertible debt or ownership equity. Angel investors may work individually or in groups. Angel investors typically use their own funds, unlike venture capital firms that manage the pooled money of other people in a professionally managed fund. Angel investors can provide funding for your business by investing amounts anywhere from a few thousands to a few million dollars. Angel investors can provide the funding needed for your business or start-up and generally are an ideal source for ‘seed’ capital. Angel investors often provide funding on almost any kind of debt or equity basis.

Although business angel investors have been known to fund start-ups and even business ideas, in today’s market they prefer companies that have a minimal or at least a ‘bootstrap’ operating history, where the work experience and track record of the entrepreneur demonstrates his or her capacity to make the enterprise a success.

Angel investor funding is unlike other investors funding because the angel investors generally not interested in controlling your business, but instead prefer to play an advisory or mentor at times. Because they often want to provide assistance to new businesses that will enhance the greater community, the angel investors may make providing funds contingent upon your adherence to highly ethical kinds of business practices.

Angel investors take a huge personal risk when it comes to investing funds in a business and they typically expect high returns within five years or so in return. Angel investing can be an expensive way of getting the necessary funds, but it does fill the gap in instances where banks will not extend loans due to the business venture not qualifying by traditional banking standards. Many angel investors take steps to protect their funding or investment by asking the business to ask for their approval before certain actions, for e.g., selling company assets or issuing of stock, or they may have other criteria.

The criteria angel investors have for funding varies a lot; although they are prepared to offer credit, they are careful to protect their investment and are certainly not reckless.

Potential angel investors for funding your business can be found most places, but the best way to find them is through creative networking. Here, you need to put in as much time and energy into looking for an angel as you might do in developing and operating your business. It is not easy to find an angel investor to raise your funds, with a snap of fingers.

There are two categories of angel investors:

  • Non-professional: These angel investors fund you because they know you personally
  • Professional: These are wealthy private angel investors who routinely fund start-ups in some industries.

You can take the following steps, which will help you increase your chances of finding an angel investor for funding:

  • Make a list of business associates as well as your family and friends. Identify those who are likely to be or know potential angel investors for funding. Talk to people around you. If your associates don’t know any angels, ask them for referrals to people who might.
  • Research professional associations, local chambers of commerce, other small business entrepreneurs, even business service professionals, who might be sources for getting funds from angel investors.
  • Locate relevant events, including upcoming seminars and parties relevant to your industry, meetings of trade and professional organizations, trade shows/festivals, events where start-ups are able to ‘pitch’ their ideas to angel investors, as well as conferences devoted to business funding and fundraising. These are places where angel investors are most likely to be found.
  • Research events prior to attending them; find out who will be there. Look through the speakers and/or exhibitor lists for angels.
  • Learn everything you can about your specific industry. Analysts and/or journalists relevant to your industry are also good sources you can use to find or track down local or international angel investors who fund the kind of business venture you need money for.
  • Identify angel organizations; find and contact those in your area or relevant to you industry to learn the best way to make an approach.
  • Identify angel matchmaking firms, individuals and websites. Generally, they solicit pertinent information from both the companies and angels looking for investors for funding in one of two ways: either by actively trying to make a direct match, or passively allowing matches to happen by making pertinent information available to interested parties on both sides.
  • There are different angels who are interested in different kinds of industries or businesses. Find out what kinds of companies the various angel investors have provided funds to or invested in, both in the past and present.
  • You need to have an open mind. Your angel investor, who would provide you the funds you need, can turn out to be almost anyone, even family and friends. In fact, angel investors are more likely to believe and fund or invest in new businesses owned by people they know.
  • Be ready with your pitch, business plan/executive summary or audio-visual presentation – all prepared in advance so that when you find your angel investor who would fund you, you are able to close the deal or in the least, set up a meeting as soon as possible. You don’t want to put them off by looking unprepared.
  • You need to stay positive and enthusiastic about your business because you never know when or where you might bump in to your angel investor who’d provide you with the necessary funds you need.

You need to realize fully what angel investors can offer you – the chance and the opportunity to make your business and dream a reality.