An angel investor supports your business idea by bridging the funding gap so you can get started. In return, they expect their seed money to pay dividends. Find ways to attract them by convincing them you have the goods.
- Step 1: Connect with the angel investor by emphasizing reward -- not just proving you have anticipated risks. You will appear inept or confused, as well, if you inflate projections or valuations.
- TIP: You will be expected to reassure an angel by committing to run the business for 5 to 10 years and not transfering ownership to a family member or relative.
- Step 2: Articulate every aspect of your plan and prepare an elevator-worthy, 30-second summary -- just in case. Angel investors listen to ideas every day, so they want people to cut to the chase.
- FACT: As of 2009, there were an estimated 260,500 active angel investors in the United States.
- TIP: Angel investors are a critical source of intellectual capital as well, especially when they have experience or expertise in the industry you are entering.
- Step 3: Get help from your contacts to get a meeting with prospective investors and pitch them with an eye toward auditioning not only the idea and your skills, but their suitability for what you want to do. The right rapport with an angel investor is critical.
- Step 4: Research and join industry professional organizations or trade groups. Attend meetings and get involved with others to strengthen ties and tell your story to suitable resources.
- Step 5: Search online for hundreds of angel networks available. Source your angel through local or regional networks. Angels want access to their networks to make meetings more convenient.
- TIP: Angel investor groups typically own between 15 and 40 percent of a company, though they rarely want to be active in or in control of daily operations.
- Step 6: Interview contacts to learn what the angel prefers for investments, what kinds of properties they have bought into previously, and what kind of success they had. Learn all you can about them.
- Step 7: Network among friends, business associates, and acquaintances who might qualify as angel investors or else know someone who does. You will always have a better chance to land investors if they trust and know you.