Starting your business is exciting, but finding the funding to launch it can be challenging.
As an entrepreneur with a great idea, having the support of investors who share your vision and believe in your potential can really help your business move forward.
While many funding options are available, angel investors are a popular choice for startups seeking early stage financing. According to details submitted to the UK government by UK Business Angels Association, small businesses receive approximately £1.5bn a year from angel investments.
The challenge, however, is how to find angel investors for your business.
In this article, we’ll explore where to find business angels, what to look for, how to apply them and more. Whether you’re an experienced entrepreneur or a first-time founder, these insights can help you secure the funding your business needs to thrive.
Here’s what we cover:
- What is angel investment?
- Where can business owners find angel investors?
- What attributes should you look for in an investor?
- What businesses need to do to get angel investment
- How to apply for angel investment
- Final thoughts on getting angel investment
What is angel investment?
Angel investors are wealthy and resourceful individuals who take the risk of providing capital to early stage businesses or startups.
The investment generally comes in exchange for equity ownership. However, it can also come as convertible debt, which allows them to convert their investment into equity at a later stage.
Angel investors can provide more than just capital. They often have valuable expertise, industry knowledge and networks that can help startups succeed.
Plus, they can provide guidance and mentorship from their prior experience.
Angel investors can invest alone, as a group of investor syndicates, or through a crowdfunding platform.
An angel investor can come from any background. They might be retired business owners, could have inherited a lot of money, or come from wealth, for example.
Angel investors are often more flexible and less formal than venture capitalists (VCs), banks or other types of investors. This makes them an attractive option for startups that may not meet the criteria of other funding sources.
Banks and VC firms have strict criteria to follow and they will only put money into businesses that have already taken off in a positive direction.
On the other hand, angel investors can put money however and whenever they want. Once you get them interested, nothing is stopping them from investing in you.
Where can business owners find angel investors?
Finding angel investors and fundraising can be taxing and it involves dealing with rejection. On the bright side, even when you don’t get funding from your potential investors, getting quality feedback and advice is possible.
From experience, they might point out where to improve and what to look out for.
In the beginning, one can easily feel lost about where to start. To help you out and make things easier, here are some of the best places to find angel investors.
1. Personal networks
It’s the easiest and most comfortable path to funding. Use your personal and professional networks to start.
Friends, family members, former colleagues and mentors may be willing to invest in your business or introduce you to potential investors.
Reach out to them and schedule a meeting to share your story. Don’t overlook wealthy relatives who might be interested in investing. If your network isn’t that big, consider attending local networking events and conferences to meet potential investors.
2. Online platforms
You can find all sorts of angel investment networks or firms from these sources. These platforms allow you to create a profile, share information about your business and connect with potential investors worldwide. It’s a very convenient way.
But remember, with convenience comes competition.
3. Social media
Social media is full of unconventional opportunities and it works like magic. Instead of actively running after people, you can create content regarding your business and be vocal about what you’re doing.
Once you build an audience, it becomes easier to reach more people. You might even receive requests from investors in your DMs if you’re lucky.
Besides, Linkedin can be a powerful tool to build and connect with your target audience super fast.
4. Industry events
To meet potential angel investors who are interested in your field, attend events and conferences related to your industry. Networking with other entrepreneurs and investors looking for innovative startups is a great opportunity.
5. Business pitch competitions
Participating in business pitch competitions is a great way to refine your pitch and get in front of potential angel investors.
Even if you don’t win, the feedback from the judges can help you improve your business pitch and direction for your company.
And if you do win, it can provide valuable exposure and credibility for your business, making it more attractive to investors in the future.
What attributes should you look for in an investor?
When seeking potential angel investors for your business, look for those who can provide value beyond just a financial investment. There’s definitely more than just money required when it comes to growing a business.
While it’s rare to find an angel investor who possesses all of the ideal attributes for your business, it’s important to identify the most critical qualities for your current situation.
By focusing on those key attributes, you can prioritise your search for investors who best fit your needs.
If you’re looking for an investor with specific industry expertise, for example, you may be willing to compromise on the amount of capital they can provide.
By understanding your priorities and needs, you can better target your search for the right angel investor for your business.
Here are some key attributes to look for in an angel investor:
Experience, expertise and network
You should seek investors who are familiar with your industry or a related field.
These investors have valuable industry insights and connections that can help further your business. It’ll be possible for them to connect you with potential customers, partners and other investors.
Plus, certain expertise in areas such as marketing, sales or finance can make a potential investor more valuable.
Find investors who share your vision and are passionate about your product or service. If that doesn’t happen, they should at least understand your passion and respect it.
These investors are more committed and invested in helping your business succeed. They’ll be more understandable and flexible too.
Make it a priority to look for investors who have a clean and successful track record of investing in startups and helping them grow.
Communication and team player
Communication is the key and you have to work as a team to secure success in business. Look for investors who are good communicators and have a collaborative approach.
A good investor can provide constructive feedback, be open to new ideas and work with you to achieve your goals.
What businesses need to do to get angel investment
Getting angel investment opportunities for your business requires more than just a great idea or a promising product or service.
Angel investors seek specific qualities in a business and its founders that assure them success and a high return on investment (ROI).
The better you prepare, the higher your chances of getting angel funding.
Here are some key steps to give you the best chance of winning angel investment:
Develop a business solid plan
With a strong business plan in place, you can demonstrate to potential angel investors that your business is well-thought-out and has the potential for long-term success.
There’s no alternative to a strong business plan for attracting angel investors.
It should provide a clear and comprehensive overview of your business, products or services, market analysis, financial projections and growth strategy.
Market test your product or service
Just an idea isn’t worth the investment. It should be realistic and acceptable to the market first. Hence, before seeking investment, validating your product or service in the real world is important.
Conduct customer research, gather feedback and refine your offering based on your learnings.
Determine your funding needs
Telling investors what you actually plan to do with the funding is important.
Determine how much funding you need to achieve your growth goals and make a realistic financial disbursement plan. They want to see that you know what you want to do with their money.
Build a strong team
Investors aren’t putting their money into ideas, they’re putting it towards people. And that’s why the team matters the most.
Ensure your team is well organised and everyone knows their part. Investors want a team with the skills and experience to execute the business plan.
Maintain proper communication, and build a team with diverse skills and experience that can help your business grow.
Develop your pitch
Crafting a clear and compelling pitch is key to securing angel investment.
Yours should be concise yet engaging and showcase your understanding of the challenge or problem your business will solve. It should effectively communicate your business plan and the potential for growth to potential investors.
By delivering a well-crafted pitch, you can make a strong impression and capture the attention of potential angel investors.
How to apply for angel investment
Once you identify potential angel investors and prepare your business, it’s time to apply for angel investment.
In this stage, you should be patient, persistent and open to feedback throughout the process. Lastly, be respectful of their time and be prepared to provide additional information if they express interest.
Here are some steps to follow when applying for angel investment:
- Prepare your pitch: Create an attractive yet simple pitch outlining your business plan and growth potential. Don’t pitch the exact copy to everyone. Your pitch should be tailored to your target investors.
- Share your pitch: If any potential investor shows interest in your business after the initial conversation, book a meeting with them to share your pitch. Do your research, be prepared to answer any questions they may have and be open to feedback.
- Negotiate terms: From the very start, be as transparent as possible. Don’t assume something if it’s not clearly communicated. If an investor is interested in investing, negotiate the terms of the investment. Be clear about what you’re offering and what you expect in return.
- Close the deal: Once you agree to the terms of the investment, close the deal. Have your lawyer ready, and prepare the necessary papers and legal documents. Also, don’t forget to ensure you understand the terms of the investment before signing.
Final thoughts on getting angel investment
Finding the right investors takes time and effort but is very rewarding.
By following the guidelines from this article, you can increase your chances of attracting the right angel investors for your business. Be prepared to adapt and implement genuine feedback.
Finally, remember that angel investors can offer more than just funding. By building strong relationships with your investors, you can tap into more resources and take your business to the next level.
Securing angel investment is not easy, but it is possible with hard work, persistence, and the right strategy.
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