This article focuses on angel investors in the United States, as well as the process of raising angel funding for high-tech or high-growth businesses. In most other countries, it's different—and practically impossible for established enterprises without significant growth prospects.
It's also worth noting that angel investing differs from venture financing. People frequently use the word "venture capital" to refer to both angel and venture capital investments, however, this is excessively confusing. In the early phases of a business, angel investment frequently occurs before venture capital. For firms that are still growing, venture money is usually the next step following angel financing.
Angel investors are a diverse set of individuals who are neither as formally established as venture capitalist organizations, nor are as homogeneous. A successful businessperson, a wealthy individual, a group of professionals such as doctors or dentists, a local investing club, or someone altogether different could be an angel investor. For example, your angel could be a wealthy uncle.
Venture capital, on the other hand, is money invested by professional venture capital firms that manage other people's money.
The following are the fundamentals of obtaining investment from angel investors:
1. Finish your Business Plan
Get a business plan today if you don't already have one. This blueprint is not to be a 200-page report; keep it as short and to-the-point as possible.
There are a few reasons why you need a business plan:
- To assist you in estimating how much money you'll require
- Priorities, milestones, financial prospects, strategy, and tactics should all be mapped out.
- To figure out what numbers and critical elements you'll want to emphasize in your summaries and pitches
- Finally, communicate with your investors—normally, this occurs during due diligence after your summaries and pitches have piqued their attention.
2. Get your Investor Business Plan or Executive Summary
To interact with investors, you'll need a compelling business plan or brief but detailed executive summary. Prepare a one-page plan explaining the company's development possibilities, type of business, and potential investor payback. In order to make a good impression, you should consult with a professional investor business plan writer to prepare an executive summary or detailed pitch for investors.
Creating a visually appealing, well-researched business plan is simple with Wise Business Plans. Their writers are MBA-qualified from top American universities like Oxford, MIT, and Harvard. They have worked with world-renowned enterprises and have helped raise over $4 billion.
3. Find Potential Angels
Consider Harold Lacy's method of "six degrees of separation." Someone you know, or someone advised by someone you know, or a local investment club, businessperson, or even a local development agency could be your angel.
Look through your contact list. Lacy suggests that you ask everyone you know if they know anyone who could be interested in investing, rather than if they want to invest themselves. You should also use AngelList and Gust to promote your business.
Local markets, specific businesses, and affiliations such as college or university alumni are all common targets for angel investors. Angel clubs relevant to the college or university from which you graduated, your area or state, and the industry you work in should all be included in your search.
4. Thoroughly Research your Prospects
Mail merging and mass-emailing applications aren't appropriate at this time. Angel investors aren't a one-size-fits-all solution. Never send generic communications to strangers who are angel investors.
Instead, you should approach them professionally after conducting research on each group or individual. Angel investors who are serious about their business nearly always have a strong online presence. Look them up on the internet to learn more about their background, writing, speaking, and, most importantly, their industry experience and previous triumphs.
When a possible investor appears, ask whether he or she wants a phone conversation, a meeting, a full business plan, a summary note, an email, or something else. However, you must first generate some attention.
5. Work with an Experienced Attorney
To make a real deal, you'll need the correct legal assistance. Make sure your lawyer has handled comparable cases before; if not, they should refer you to a specialist. Investments are a serious matter.
Then what? What if you Find Nothing?
Consider it. Perhaps the investment filtering process is beneficial. Instead of angel investors, you could consider alternative options. Generally speaking, investors seek out companies with significant growth potential and a viable exit strategy. When you sell your firm, they make the majority of their money.
You might be better off looking for capital elsewhere if you want to own your company for the foreseeable future and/or if you have a stable, established firm with no actual aspirations for large-scale growth.
Expand your network if you have an exit strategy, market traction, and ambitions to scale your business. Look for industry or trade events where you may meet people who have landed angel investments and possibly talk to potential investors informally to get a better feel of what they're looking for. Simply understanding why your firm fits (or doesn't meet) an investor's concept for a solid bet might be beneficial.