How To Find Angel Investors To Raise Money For Your Business

By Jennifer Fletcher, 21 Jan 19:17

Angels are generally wealthy private investors who finance business start-ups or new business ventures.

They generally are an ideal source for "seed" capital, and often provide funding on almost any kind of debt or equity basis. Such investors are referred to as "angels" because seed, or start-up capital, is the toughest to obtain.

Although angels have been known to fund start-ups and even business ideas, in today's market they tend to 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.

Unlike other kinds of investors, angels are "heavenly" because they are generally not interested in controlling your business, but instead prefer to play an advisory and sometimes even a mentor role. Because they often want to provide assistance to new businesses that will enhance the greater community, they may make providing financing contingent upon your adherence to highly ethical kinds of business practices or goals.

Potential "angel" investors can be found almost anywhere, but by far the best way to find them tends to be through creative networking. Be forewarned that you will need to put in as much time and energy into looking for an angel as you do in developing and operating your business. Unlike the stories featured in a number of popular television series, your "angel" may not just magically appear to provide you with the funding you need. The adage is that there are only six degrees of separation between you and the angel you need to meet. As a result, it's best not to rely on prayer but to actually put together an "Angel Search Strategy."

Be advised that angels come in two different categories: non-professional (those who fund you because they know you personally) and professional (wealthy private investors who routinely fund start-ups in certain industries).

By following these steps, you will greatly increase your chances of locating an angel:

1. Identify Resources Available To You. Make a list of business associates (including your banker, CPA and attorney), as well as your family and friends. Identify those who are likely to be or know potential angels (friends and families are often sources of seed funding for new businesses). Talk to everyone you know - even your drycleaner. If your associates don't know any angels, ask them for referrals to people who might.

2. Expand Your Circle. Research relevant trade and professional associations, local chambers of commerce, other small business entrepreneurs doing what you would like to do, even business service professionals (investment brokers, doctors, and money managers such as accountants, lawyers and realtors) who might be sources for angel investors.

3. Locate Relevant Events. These can include upcoming seminars and parties relevant to your industry, meetings of trade and professional organizations, trade shows/markets/festivals, events where start-ups are able to "pitch" their ideas to investors, as well as conferences devoted to business funding and fundraising. These are all places where angels are likely to appear.

4. Research Events Prior to Attending. Find out who will be there. Look through the speakers and/or exhibitor lists for angels. (Sometimes they can even be found on conference panels telling you exactly they kind of company they are looking to invest in.)

5. Learn Your Industry. Learn everything you can about your particular industry. The deeper you dig, the clearer angels will become. You can find them mentioned at conferences, named in trade magazines and in the business sections of newspapers, even quoted on relevant websites online. Analysts and/or journalists relevant to your industry are also good sources you can use to find - or even track down - angels who fund the kind of business venture you need money for.

The word angel comes from the Greek word angelus, meaning "messenger."

6. Identify Angel Organizations. There are a number of angel organizations that exist, such as Tech Coast Angels on the West Coast. Find and contact those in your area or relevant to you industry to learn the best way to make an approach.

7. Identify "Angel" Matchmaking Firms/Individuals And Websites. These take it upon themselves to match up prospective investors with small businesses for a fee. Generally, they solicit pertinent information from both angels and the companies looking for investors 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 (generally via a website or newsletter).

8. Locate Your Kind Of Angel. There are different angels who are interested in different kinds of industries and/or businesses. Just because you locate an angel doesn't mean that he or she will be interested in your particular business. Do your research. Find out what kinds of companies they have invested in, both in the past and presently. And if all else fails, get a referral from them to another angel who has demonstrated interest in your industry or type of business.

9. Work Your List. By now, if you have taken all the above steps, you should have assembled quite a good overall angel prospect list, with detailed notes. Systematically work this list by contacting everyone on it.

10. Be Prepared For Serendipity. If you do your homework, you will dramatically increase the likelihood of being in the right place at the right time. This same kind of kismet can also occur when you put the word out: your angel might hear of you and your business and be the one to initiate contact.

11. Have An Open Mind. Your angel could turn out to be almost anyone, even family and/or wealthy friends. In fact, investors are more likely to believe and invest in new businesses owned by people they know. It might be your Aunt Mabel who chooses to invest in your dream next Thanksgiving dinner.

12. Be Prepared For Success. Have the tools - such as your elevator pitch, business plan/executive summary or audio-visual presentation - prepared in advance so that when you find your angel you are able to close the deal - or at least set up a meeting - as soon as possible. You don't want to put them off by seeming unprepared.

13. Stay Positive. Angels can arrive anytime and anywhere. Stay positive and enthusiastic about your business because you'll never know when or where you'll find your angel.

Realize fully what angels can offer you: the chance to make your business and dream happen.

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