Angel investors have an interesting rep. Most startups see them as a source of free money; someone that is wealthy and just wants to give away money. Unfortunately, there are few Willy Wonka style investors out there (offering Charlie the entire factory just for being a nice boy). Getting an Angel investor to invest in your business takes as much work as getting any other investment or loan.
When trying to secure Angel investors for your startup, here are some essential tips to understand.
- Narrow Your Search to One Type of Investor. It is inefficient to try to reach out to large numbers of Angel investors. Narrow your search to those Angel investors that would be interested in your industry. If you are a fashion label, look for people that are interested in fashion - don’t go to an Angel investornetworking event made for tech startups. Similarly, if you are a specialized tech venture it won’t be helpful to talk to an Angel that has no interest in the technology field. Just like you narrowed down the scope of your business, narrow down the list of Angels.
- Investors Invest in People, Angels are No Different. Almost all investors invest in the team behind the idea as much as they invest in the idea itself. Why is that? No one wants to entrust their money to a team of people that do not understand the best ways to use that money. So while your idea may be groundbreaking, if the Angel investor thinks that your team is not strong enough, they are unlikely to invest.
- Introductions are Important. More than VCs and PEs, Angels want to invest in someone they know. But not all entrepreneurshave access to high-net worth individuals. But the way to go about it is to find someone who does know that individual. Get an introduction and then build a relationship with the Angel before turning to them with a proposal for money. Asking the right questions for advice on your idea helps in two ways: (1) you are getting free advice; (2) you are showing the Angel that you are intelligent enough to know what the right questions are. It goes a long way to help your credibility.
- You May be a Creative or a Techie, but Business Know-How is a Must-Have. One of our favorite arguments fromentrepreneurs without solid business plans is that they are not business-majors. While that is an absolutely acceptable answer if you don’t want to go into business, it throws a wrench in the system when you are trying to get investors. If you tell an investor, Angelor not, that you are not a “business person” what they hear is “you are incompetent to run a business.” All professional investors know that without a business plan, startups fail. If you don’t know how to do it yourself, get someone business-minded on board to help you develop a solid business plan and exit strategy. This also shows that you can pinpoint your own short-coming and are business savvyenough to remedy the situation by adding a new component.
- Angels aren’t “Quiet” Investors – they Usually Like Playing a Few Innings. This just means that Angel investors don’t want to hand over money and then walk away. They are interested in your company, your team, and your success for more reasons than just the money they invested. They also prefer to invest in local opportunities because they have the chance to interact with their investments. So if you are a startup based in NYC, it doesn’t make sense to seek out an Angel investor in Silicon Valley and vice versa. But this is a good thing for thestartups as well; you want your Angel investor to be more than just money – you want someone who will help mentor, guide, and provide access.
Don’t get frustrated if you get rejected the first time around, and don’t burn bridges. Maintain a relationship and continue working hard; some thing WILL turn up.
by: Benish Shah, Esq. Sheheryar Sardar, Esq., Sardar Law Firm LLC
For more information, contact: Sardar Law Firm at firstname.lastname@example.org.