You will realize that no matter how resourceful and scrappy you may be when you start a business, more money is essential.
There are many expenses involved in getting your business started, including equipment and staffing as well as permits and inventory. Although most entrepreneurs will invest some of their own capital in their startups, it can be difficult to finance an entire company on your own.
Angel investors are a popular choice for business owners looking to raise capital.
What is an angel investor?
Angel investors are wealthy individuals who invest in early-stage startups. They receive equity or partial ownership in return for their investment.
They are called angels because they take a chance on businesses. They take a chance with businesses.
Angel investors invest in businesses at an early stage, often before they have any revenue, a product or have proven their marketability. They are taking on a lot of risk and there is no guarantee they will get a return.
What is the difference between venture capitalists and angel investors?
Venture capitalists are a common topic in the world of business financing. Venture capitalists (VC) are another type of investor that shares many similarities with angel investors.
However, there are differences that business owners need to be aware of.
Angel investors:
Your personal savings can be invested in a business
Invest in businesses at their infancy stages
You can invest less money with an angel investor, which is $1.2 million for 2020.
Venture capitalists
You can invest money from partners and other companies (which is why they are often called venture capital firms).
Invest in established businesses that are growing quickly
Larger sums of money are better: In 2020, VCs invested an average of $9.9million.
What is an angel investor group?
An angel investor group, or angel network, might also be available. An angel investor group is a group that works together to evaluate startups and invest, if necessary, in them as a whole.
They tend to focus their efforts on startups in a particular industry, such as real estate or healthcare, or in a specific geographic area. This is not a requirement.
Four places to search for angel investors
Angel investing is a great way for you to raise capital for your business and also gain valuable guidance and expertise as you take on the challenges of entrepreneurship.
You probably don’t know many people with millions or even thousands of dollars to invest in your business. This raises the question: How can you find angel investors? Here are four options.
1. Your existing network
The friends and family round of fundraising is technically distinct from the angel investor round. It is usually done first, before you approach other investors.
Even if your uncle or neighbor isn’t interested in a business investment, you can still benefit from their networks. You might be surprised at the people they know, or how they can help you find someone who is interested in supporting local businesses.
TIP: It can be uncomfortable to talk about money with loved ones. You can keep things low pressure by giving your loved ones an “out”. This will help to alleviate any discomfort associated with asking for financial support or introductions.
2. Organizations and business networks
Your existing network doesn’t have to limit you when seeking funding. In fact, growing your network is an important part of the process.
Check out if there are any relevant professional networks and groups online, or in your area. You can gain insight from other angel investors by connecting with business owners. To see what results are available, you can do a simple search on the internet for “[your industry] networking group [your city, or state]”.
To get expert advice, you can also look for a SCORE mentor through the U.S. Small Business Administration. Mentors may also be able offer connections or introductions for potential investors.
3. Designated platforms
Angel investors don’t have to be located in Silicon Valley. There are many online tools and platforms that allow entrepreneurs to connect with accredited investors from any location. Listed below are some of the best:
Angel Capital Association (ACA)
Gust
Invstor
These platforms make it easy for potential investors to connect with you without having to do much digging or legwork.
4. Social media
Don’t forget about social media. To find angel investors, you can search on social media networks such as Twitter and LinkedIn.
These sites have search capabilities that allow you to search for “angel invest” and you can use advanced search settings and filters to narrow down your search by key terms and location.
How to pitch potential angel investors
Finding angel investors is just half of the battle. Next, you must figure out how to get angel investors to open their wallets to invest in your business.
Most cases will be initiated via email. Are you stuck on what to say or how to get the conversation started? These are some tips to help you make a great pitch to angel investors.
1. Be specific about your requirements
Before you approach anyone for investment, it is important to understand your business and your expectations. These are the questions you need to be able answer:
What amount of money do you really need?
What amount of equity would you be willing to trade for this investment?
What number of investors would you be willing to invest in?
What are you going to use the investment for?
Are you only looking for investors who are experts in a particular industry or region?
If you don’t have this information, it can look like you are not prepared to reach out to potential angel investors. This clarity will help you to create a concise, informative, and direct pitch for potential angel investors when the time comes.
2. Ask for a introduction
Let’s suppose you have found an angel investor that you are interested in approaching. Check out their LinkedIn profile (even if they aren’t there) to see if any of your connections or contacts match.
Reach out to those connections to ask them if they are willing to introduce you. Warm outreach is better than cold outreach, and it will increase the likelihood that your email gets read by potential investors.
Are you unsure how to ask for an introduction. You don’t have to make it complicated. Here is a template that you can use.
Hey, [Contact Name]
I hope you’re doing well!
I am starting [Business Name], which will provide [products/services you offer/problem you solve]. I am currently looking for angel investors and I noticed that you are connected to [Potential Investor name].
Would you mind making an introduction? There is no pressure but it doesn’t hurt to ask.
Please let me know how you can return the favor.
[Your Name]
3. Keep your email brief and to the point
It doesn’t matter if you are able to get a personal introduction, it’s time for you to contact potential investors directly. It’s tempting to send a long email outlining your background and detailing the details of your business plan. It’s better to keep this initial contact brief.
This email is not meant to be your pitch. Keep your eyes on the details. This is your elevator pitch or cover letter. The goal of this letter is to grab their attention and get them interested in learning more.
This is the basic email that you will receive in your introductory email.
A few sentences about you and your background
Your business’ value proposition
What amount you want to raise
A call to action
Below, we’ll be discussing a few of these items in greater detail. But there’s another aspect you need to be aware of: your subject line.
These few words can make a big difference in whether your email is read or opened. According to research, 33% of people will open an email based upon the subject line. Make your intention clear by using a subject such as:
Introduce [Business Name]
Looking for investment in [Business Name]
Investment opportunity for [Business Name]
These are clear and concise, but not too promotional or salesy.
4. Nail your value proposition
Your value proposition is the most important piece of information you should be considering when you send an initial email to angel investors. This is a short statement that explains why your company is the best option for your customers.
Although your first email should not be long, it is important to convey the essence of your business in just a few sentences.
Keep your focus on the problem that your business solves. Investors will be impressed if you can clearly explain why a particular need exists and how your company fills it.
5. Avoid “salesy” language
You are confident that your business is unique and that investors will be as enthusiastic about what you are doing.
Passion for your business can be a great asset. However, it can also motivate you to use salesy or gimmicky language.
Investors may find phrases like “don’t lose your chance” and “once in a lifetime opportunity” to be too pushy or misleading. Instead, be clear, direct, and honest.
6. Let’s end with a call for action
Each email should conclude with a call for action. Otherwise, people will stop reading and wonder what they can do next.
Your call to action should not be to request an investment. To learn more about your company and the investment opportunity, ask them to reply to the initial email.
This is your first email, so asking for an investment is not a good idea. This email is intended to help you get started. However, patience is key.
Angel investors are able to get your business off of the ground
No matter how resourceful or ingenious you may be, starting a business can cost money. Sometimes more than you can provide on your own.
You don’t have to dig through your sofa cushions looking for spare money. Angel investors may be able to provide the capital necessary for your startup’s launch.
Although it can be nerve-wracking to approach angel investors, proper preparation can help ease some of your anxieties. This guide will help you find angel investors and how to secure the investment you desire.
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