Angel investors.

If you're an entrepreneur trying to secure funding, one of the options available to you is raising money through angel investors. Unlike venture capitalists, angel investors are typically individuals who are either successful entrepreneurs themselves, or simply wealthy business people interested in investment. Are you wondering whether you'd like to seek angel investment? Here are some of the benefits of seeking funding through angel investors:

  • Because many angel investors are seasoned business people or entrepreneurs, you get the additional expertise of someone who knows how to run a company.
  • Many angel investors are more involved, and invested in, the operations of the start-ups they fund.
  • Most angels don't expect the kinds of returns that venture capital firms do, which can be on the order of hundreds of millions of dollars. If venture capitalists have said that you don't meet their requirements, angel investors may be the way to go.
  • Angel investors often fund businesses and start-ups in their area. That means you can raise serious capital from them, even if you're not located in Silicon Valley, where many venture capital firms are based.

On this page we describe all the steps in the process of raising money via angel investors. That includes finding, pitching, and getting funding from angel investors.

Finding angel investors.

One of the first steps to securing angel investment is actually finding angel investors who may be interested in your start-up. The task isn't as daunting as you might think. While a personal introduction is always the best way to connect with angel investors, there are other alternatives as well. Here are some of the best ways to track down angel investors that may wish to fund your start-up:

  • Network with friends and business associates. You'll have your best shot a catching an angel investors' attention if you're introduced to them via a friend or acquaintance. Talk to your circle of friends and business associates who may know angel investors. An introduction may be that simple.
  • Use internet databases. There are many Internet databases that make it easier for an entrepreneur to find angel investors. One of the major services is Angelsoft.net.
  • Use social networking. Like everyone else, angel investors are on social networks. Surf LinkedIn for angel investors in your area or, even better, find out if any of your friends, family members, or acquaintances are connected with them.
  • Research. An easy way to start is to simply Google "angel investors" and your area. Search local news stories to find out about start-ups in your area funded by angel investors. Basic research can go a long way to helping you find angel investors.

Pitching angel investors.

Once you've managed to find angel investors who you think may be interested in your start-up, the next step is to contact and pitch them. Many times the first point of contact is via email, although sometimes it's in person or via phone. Once you've got angel investors interested in meeting with you, you need to develop a pitch. A pitch to angel investors should be short and to the point. You don't want to bore angel investors with long-winded explanations or speeches that aren't specifically focused on the matter of your start-up. Pitches to angel investors should also include the following:

  • A PowerPoint slideshow presentation. The most effective way to pitch your start-up to angel investors is using a slideshow style presentation that incorporates visuals. It will help you stay on track and focused.
  • A description of your product or service, and what problem it solves. You should be able to quickly and concisely explain to angel investors why consumers will want to purchase your product or service. If you can't do that immediately, you should articulate that before going into the meeting.
  • A business plan. While a business plan isn't technically a part of a pitch, you should bring one along with you to your presentation. Angel investors will then be able to review your start-up in more detail after the presentation if they're interested, and it also provides them with more information, which they'll need if they're interested in funding your business.

Getting funding.

The final step in working with angel investors is actually securing funding from them. You should be aware that angel investors are not like venture capitalists, nor does their capital act like a bank loan. Angel investment is its own class of investment, although it does share some similarities with venture capital. For instance, like a venture capital firm, if angel investors are interested in funding your business, they will negotiate a deal with you. This typically will mean giving up some percentage of equity in exchange for their capital. The amount of equity you must give up in the company will be based on how much angel investors are investing in your start-up.

There will likely also be some negotiating about how deeply the angel investors will be involved in your start-up business. Some angels assume day-to-day roles in a start-up, while others take a more hands-off approach to the start-ups they fund. Either way, this will likely be discussed, and decided upon, before any money exchanges hands. Lastly, once angel investors provide your start-up capital, you can expect that down the road they will naturally expect some return on their investment. While angel investors are naturally hoping for the best possible return, no specific amount is guaranteed. This figure is typically determined later, predicated on how the business is doing.