The Ultimate Guide to Angel Investment for Startups: Get in Front of the Right People

In the early stages of a startup, the founders will often have to fund the company themselves, friends and family.

Once you run out of money from these sources, it’s time to find someone else to invest in your business. That is where angel investors come in.

With such a wide range of potential backers out there, you may be wondering which type of angel investor is right for you and your business. To help answer that question, we’ve compiled this ultimate guide to angel investment with all the information you need.

What is an Angel Investment?

Simply put, an angel investment is when someone gives you money to grow your company. They take an equity interest in your business and put some of their own money into it.

The most common way of courting investors is through seed funding rounds. These rounds usually begin with an angel investing between $50,000 and $500,000, but can get as high as $1 million for the best startups.

You will usually pay them an agreed upon rate for their time and expertise as an investor. Unlike a venture capitalist, who will invest in every company they come across for a chance to earn a return, angels usually only look for a few investments in a given time period. They will look for investments that make sense for them and will often have a specific niche they are looking to fund.

Some examples of niches include consumer goods, healthcare, food, and various other industries. There are many other types of niches, but these are the most common.

Alternatively, they may see your company as an investment opportunity with a promising future. Either way, angel investors want to see growth in return for their investment, and that is why Series A and Series B rounds are usually only after a few million dollars have been raised.

Who Should Look at Angel Investment Opportunities?

Anyone can look at an investment opportunity and say yes, but only if they have the right skill set.

For example, someone wanting to invest in a product that they sell is not the right person to be looking at investment opportunities.

Instead, they should be looking to find partners, customers, and those seeking to sell their products. When you are looking to invest in businesses, you will want to look at the type of person that wants to own a small stake in your company.

That person will usually be someone who has a good amount of experience in their field and may even have a lot of money at their disposal to make investments. As such, they are usually looking to invest in companies that have a good chance of success by providing an equity return.

How to Find Angels for Angel Investment?

There are certain ways to find angel investors:

Search for investors on AngelList: This is the best place to look for investors. Through AngelList, you can network with investors and search for the right fit.

Put up a website: This is a must to showcase your product and business. You can also use your website to host your investor deck, which will be a PowerPoint-style presentation highlighting your product and its potential. A good web-hosting service provider that has made it super-easy and inexpensive to create a website is Bluehost.

Create an elevator pitch: On AngelList, you’ll often see investors ask for a short elevator pitch to showcase what your product does and why it matters. This should be about 30 seconds long and a simple summary of your product. Moreover and in later stages, investors might ask you to send them a pitch deck. In this post, we provide several tips and tricks to create a pitch deck that stands out.

Contact investors directly: AngelList has a built-in feature that lets you contact investors directly. Make sure to include the details of your product and business, as well as your investors’ contact details.

Attend investor events: Angel groups and conferences are great ways to meet investors and find one-on-one deals. You can also find investors at networking events, like cocktail parties and conferences.

Partner with incubators and accelerators: A number of incubators and accelerators offer funding programs specifically for start-ups looking for investment. Through these programs, you can find investors and expand your network. If you would like to know more about a successful collaboration with accelerators, this article provides several critical points to consider.

Types of Angel Investors

Individual investors: These are your regular friends and family members who may be willing to invest as little as $10,000 to $25,000. While they may not be the most reliable source of funding, they may also be interested in the social aspect of investing in a start-up.

Private equity and hedge fund investors: These investors are usually long-term, high-net-worth individuals. Some of these investors may also be willing to fund Series A and Series B rounds. As a start-up, you can only meet with them through corporate venture capital firms.

Limited Partners: These are people who are typically family members or friends who are looking to invest into a company. They may be looking to make a return on their investment, or they may be simply looking to have an ownership stake in someone else’s company.

Corporate investors: Venture capitalists, corporate investors and other investors who have already invested in other companies are often willing to invest in start-ups. You can also reach out to banks and financial institutions to see if they are interested in funding your start-up.

Pros and Cons of Angel Investing

There are a lot of benefits to investing in startups, but there are also a few cons that come with it as well.

When thinking about which one might be right for you and your business, you will want to weigh each of these pros and cons to see which ones might be better suited for you.

– Pros:

Quality Control: One of the biggest perks of angel investing is that you will get to see the product in action before making a purchase. This will give you the opportune opportunity to veto any bad ideas or products before they come to fruition.

Acquired Taste: Angel investors generally receive a 10-15% stake in the company. If they like what they see, they may decide to increase their stake in the company.

Access to Investors: As an angel investor, you will be receiving leads from companies that are looking for funding. This will allow you to get instant attention and avoid the middleman.

Free Advice: You will be able to get advice from investors that have been in the game a bit longer than you have. These investors can give you tips on how to improve your pitch and help you navigate the best path to success.

– Cons:

Limited availability: Angel investing is more difficult to obtain than other forms of startup financing. If you have connections with individuals that are wealthy and willing to invest in your company, you may have a better chance of securing angel investors. Before reaching out to potential angel investors, it is important to have an understanding of who they are. It is difficult to procure angel investors because they are usually connected to other investors already.

Ambiguous terms and slow investing process: When attempting to close an angel investment deal, negotiating terms can be tricky because angel investing is less formal than other startup funding approaches. Both parties want to get a good deal, which can frequently result in verbal bargaining, but no agreement is ever completed. Drafting terms into an agreement as you attempt to finish the process can help.

Rapid growth expected: Investors want a return on their investment as soon as possible, which means those investors will be pressuring you to continue growing your company, even if that is against your company’s long-term plans. Although you intend to keep your business small, those desires might go against the expectations of angel investors.

Final Words: Should you look for angel investment?

Funding your business is a critical step towards success. It can be frustrating and time consuming, but it is well worth the effort.

There are many avenues to find investors for your business, including seeking out potential investors on AngelList, networking with potential investors at events or via social media, or reaching out to potential investors directly.

Once you’ve found the right investors, it’s time to make a pitch. Make sure to include a detailed business plan, a financial model, as well as your product and market plans.