How to Find Angel Investment in a Recession: 5 points to consider

When the economy is struggling, every business is looking for ways to stay afloat. But finding capital can be difficult under these circumstances, as investors are often more reluctant to trust in uncertain times. This includes finding angel investment in a recession.

The main challenge most startups face during a recession is access to capital. It’s not that they don’t have any brilliant business ideas or capable founders, it’s just that no one is willing to take the risk of investing in them at these circumstances.

As a result, angel investors and other potential partners are harder to come by than usual. That said, there might be some small signs you haven’t been completely lost or forgotten about your passion project after all.

Here are five points you should consider if you feel like your business idea needs an extra push to find angel investment in a recession.

1. Be aware of the current market climate

If you’re currently seeking capital for a startup, you’ve got to be aware of the current climate of the market. That’s the only way to determine if your idea is in demand or if there’s a real need for it.

During a recession, many consumers and business may decide to spend less and save up more money which means the demand for your product or service might be less than before. You have to make sure there is still need or traction on the customer side, or otherwise, it is best to pivot to another solution or product.

It can be helpful to check online forums, online communities, and social media channels to see if there is a lot of talk about your product or service. Moreover, you can assess the current demand or organize interviews or focus groups with your customers. Keeping track of these can help to build a case for angel investment in a recession.

If it’s popular among your target market, this can be a sign you’ve come up with an idea that people want even in a recession (yay!). This, in turn, can help you find more investors and partners in this market climate.

2. Diversify your network and cultivate new ones

You might have heard this tip before, but it’s still true. It’s important to diversify your network, but it’s also important to cultivate new ones. This is especially the case in a recession so it is important to consider more types of investors than just angel investment in a recession.

If you have a large network of investors, they might know someone who can help you find new funding and have no issue funding a thriving startup like yours in this harsh market climate.

It might be someone they know, or they might have a connection to someone they don’t know. Meanwhile, if you have small social circles, you might be able to find investors who fit your niche or have similar interests or hobbies.

If you can create a smaller social circle who are interested in your business idea, you might be able to cultivate a new funding source. It’s always important to spend time on diversifying your networks of investors, but during the recession, if you need capital, you should focus more on this and to cultivate new ones.

3. Ask yourself if you can pivot or do a do-over

If your business idea is a bit stale, it might be worth revisiting it or doing a do-over. If you’ve already gone through a process of making your product or service, investing time, and funds into it, it might be worth finding a way to pivot the idea.

Pivoting means a strategic change in the direction of the startup such that you focus on a new business model. Read this post where we explain how TravelActions (now a unicorn) successfully pivoted in the beginning of the pandemic.

In fact, many startups had to pivot in the pandemic or other recessions that suddenly hit the economy. You can benefit from the data and customer feedback (first point explained earlier) to learn about how and when you should pivot, if deemed necessary.

If you’ve already found a market for your product or service, it might be worth finding a way to make it different or refined enough to bring it to a new market. You might find that by changing your product or service, you can attract an entirely new customer base or find a new market.

4. Prove that your idea is profitable and scalable

Once you find convincing evidence that your business model would work in a recession as there will be customer needs, it’s worth proving to potential investors that it is profitable and scalable. This can be done in a number of ways.

You can start by finding customers or showing revenue. If you have a product or service that is selling (even with making losses), it could be worth showing it to potential investors. Having access to even a few paying customers is a strong evidence of a product-market fit. Far better, if your business is profitable, you have even a higher bargaining power to negotiate the deal with angel investors.

Moreover, you could find ways to scale your business idea. Showing scalability (increasing revenue with incurring much costs or investment) is another strong evidence worth showing to investors.

You can read our post on growth hacking and on how to launch your online business that provides some tips and tricks on growing your business with little investment.

5. Find ways to stand out from the crowd

If your business idea is completely unique, it might be worth standing out from the crowd. This is especially important if you’re looking for investors during a recession, but it can be helpful even if the economy is doing well.

During a recession, many startups are searching for investment so it could be that investors receive thousands of proposals. If you cannot stand our from the crowd, you have very little chances of raising capital.

You should work hard on sharpening your unique value proposition and go an extra mile to “surprise” your customer. This can be done by finding unique ways to market your product or service. To stand out, you can go back to the customers’ pain points and carefully reflect on what they need and, in fact, job-to-be-done.

Another way to approach this is to carefully and critically analyze your competitors’ products and offerings and compare it with yours. How you can provide a superior offering that could delight your customer. Again, you need to validate these “assumptions” with your customers and other key stakeholders.

Final words: When in doubt, keep pitching for angel investment in a recession

If you’ve tried everything in this article and you’re still searching for angel investors, you might be able to try a last resort. However, this tip can be helpful even if you don’t need to find investors for your company.

This is because it can help you find funding for your own company. This might sound silly when you first read it, but in a way, it’s like a shortcut to finding financing for your own business idea.

It can be helpful to have a business model or product before you go out and pitch investors. Instead of pitching investors, you can pitch your business model or product. This can be helpful in a number of ways. First, it can help you find funding for your own business idea. Second, it can help you pitch investors on your own terms. Third the focus will be on the business model itself and can be used as a way to validate it.

Investing in a startup during a recession can be especially challenging, but it doesn’t mean that you have to give up. By following these five tips, you can make it through even the toughest of times.