Are you looking for an angel investor to help start your business?
If the answer is YES, then this might be the most important article you’ll come across today, and here’s why;
With over 25 years of experience as a banking expert and financial coach, I’ll provide you with the best tips on how to find angel investors for your small business.
And do it as quickly and easily as humanly possible.
Let’s begin!
First, if you’re looking for angel investors for your small business, there are a few steps you can take to increase your chances.
So, in this article, I have outlined for you pretty much all you need to know about finding the
perfect angel investor for your startup or small business.
Stick with me; you’ll also learn what you should look for when choosing an angel investor.
But before that, let’s first define what an angel investor is.
What is an angel investor?
Before finding an angel investor, you must fully understand first what an angel investor is.
For starters, an angel investor is someone willing to provide the necessary capital to an entrepreneur or a small business owner in its early stages.
And when I mean early stages, I mean very early—sometimes, even if the business is just an idea or a plan.
In exchange for financing your startup, the angel investor usually takes equity in the business or company.
“But why are they called angels?”
They are called angels since they are usually a “saving grace” for startups or young entrepreneurs.
Because they are usually a saving grace for startups or
Since angel investors are lending you money at such a premature age, it’s viewed as a riskier investment than other types of lending options.
That’s why angel investors are popular among business owners struggling to get a loan approval.
Angel Investors vs. Venture Capitalists: What’s The Difference?
Angel Investors and Venture Capitalists (VCs) are often mistaken for each other because they have similarities. Both want to invest in your business in the hopes of getting a profit or return.
However, there are some significant differences between these two types of investors.
For instance, angel investors invest very early in a business to help it start, whereas VCs usually fund the growth or expansion of companies that have already been operating.
Another notable difference is that venture capitalists use money pooled from companies and other funds to invest, while angel investors use their own personal money.
Lastly, angel investment amounts are usually smaller than venture capitalists.
How To Find Angel Investors For Your Small Business
The question remains now that we’ve defined what angel investors are.
How do you find angel investors?
If you’re a new entrepreneur or, like most people, without huge connections, it can be difficult to get funding, especially when finding an angel investor.
Without further ado, here are a few steps that you can take to find angel investors to fund your new business.
1. Create A Strong Business Plan
First, you must create a strong business plan to get funding for your business.
A business plan outlines your business concept, market, and projections.
A strong and well-qualified business plan shows potential investors you’re serious and have a clear plan for the startup’s future.
A strong business plan must include the following:
- Executive Summary
- Company Description
- Products and Services
- Market Analysis
- Organization and management
- Product line
- SWOT Analysis (strengths, weaknesses, opportunities, and threats)
- Marketing and Sales Strategy
- Funding Request
- Financial Analysis
- Appendix
2. Do Your Research
Just like in any investments or other types of financing options, it’s crucial to understand what you truly need.
Before reaching out to potential investors or lenders, you must do your homework and thoroughly research the kind of investment you’re looking for.
You must have a clear understanding of your business field, your market, and your financial health.
How much funds do you need to start operating? Do you need $20,000
Once you’ve researched, you’d want to prepare the necessary requirements, such as financial documents, government-issued IDs, a strong business plan, and more.
Present essential documents and a realistic financial projection to help potential investors understand how much funding you need to start your small business.
This will make communicating with potential investors easier and help you identify which investors are best suited for your business.
3. Reach Out To Family and Friends
Even though many people don’t classify friends and family as angel investors, there are still angel investors who fund their friend’s or family’s businesses.
If you’re trying to find a business, you should not look further. Your loved ones may be able to help you out.
Did you know that, in aggregate, friends and family invest the most in startups? Friends and family invest over $60 billion annually, while angel investors only invest $20 billion annually.
If you want to approach any of your close friends or family members for startup money, ensure you have a polished pitch ready.
Knowing them personally shouldn’t be your way of getting those funds.
You must also communicate professionally, even if it’s one of your closest family members or friends.
Make an appointment or set a meeting where you will show your proposal.
Even though they are close to you, it doesn’t mean they are entitled to lend you their money.
It’s difficult to mix personal and professional relationships.
Don’t pressure them into giving you funds. Ensure that there are no hard feelings, even if you get turned down.
4. Grow Your Network
One of the best ways to grow your network is to start in your area.
Start by asking around your friends, neighbors, and other family members.
Engage in the small business community. They can inform you about investors looking for new investments or where to look for a possible angel investor.
5. Be prepared to give up equity
Most angel investors want to take equity in exchange for financing your startup.
Be prepared to relinquish a part of your company’s ownership if you truly want that fund or investment.
6. Consider Online Platforms
There are plenty of potential investors who can help startups. You won’t have to rely on traditional lenders like banks anymore.
Nowadays, you can find lenders on the internet. There are multiple designated platforms designed to help business owners find angel investors.
Here are a few groups or networks that can help you start your business:
- Angel Capital Association (ACA)
- AngelList
- Invstor
- Gust
- Investor Hunt
- Angel Investment Network
- Angel Forum
- Tech Coast Angels
7. Be flexible
Lastly, when it comes to finding an angel investor, you need to be flexible.
Remember that you’re not the only one negotiating. Potential investors can offer counters or different terms when investing in your business.
Be willing to compromise on some demands to ensure you get the financing you need.
Advantages Of Having An Angel Investor For Your Business
In this day and age, many investors or lending options can help with your business’s finances.
However, having an angel investor can significantly benefit your business.
Here are a few advantages of an angel investor:
1. Growth
One of the main reasons why many pursue funding is to help grow or expand their business.
Angel investors offer many advantages, and the growth of your business is one of them.
An angel investor can fund your business to start its operation, hire new talents, and purchase large essential equipment.
2. Less risk
Having an angel investor is less risky than taking out a small business loan, especially unsecured ones.
Unlike business loans, when you get funding from an angel investor, you do not need to repay it back since they usually want equity in exchange for financing.
3. Mentorship
Most angel investors already have a lot of experience in investing.
Practiced investors can offer expert advice, connections, and proper guidance to help your business operations.
Angel investor’s mentorship offers plenty of insights and resources to help your business grow.
4. Credibility
When a well-known angel investor starts to fund a business, they also put credibility on your business’s reputation in the industry.
It shows that they believe your business has the potential to succeed, attracting other investors who can help fund your different projects.
What Should You Look For In An Angel Investor?
Every angel investor is unique; not everyone might suit you and your business.
Having an angel investor is like having a partner for your venture. You need to trust them and ensure that your goals align with theirs.
Here are a few factors you should consider when finding the right angel investor for your small business:
Industry and Investing Experience
When looking for angel investors, start with angels that already have experience in your specific industry.
For example, if you’re a retail startup, research and find investors with previous retail experience rather than contacting tech or real estate investors.
Having an experienced angel investor in your field can become a great advisor to you in the future.
Another thing to consider when choosing an angel is their investing experience.
If you’re relatively new in the small business community, try finding angels with plenty of experience.
Financial Stability
Angel investors should have a high net worth that will have no problem financing you for a specific amount.
Ensure that your angel can invest in the business without any potential problems in the future.
For instance, be sure that your investor is not investing money they will need soon.
Mentorship Ability
Navigating the world of businesses and financing can take time for a relatively new business owner or founder.
Fortunately, many angel investors can act as advisors and help you in times of trouble.
Alternative Financing Options for Small Business Owners
Business owners need financial assistance to achieve their goals and grow their businesses.
However, getting approved for a loan from traditional banks and lending agencies will take work due to complicated qualifications and requirements.
Many of these alternative lenders exist online, and they might become beneficial for business owners who need more collateral, have better credit, and have been turned down for loans.
Crowdfunding
Crowdfunding websites such as Indiegogo and Kickstarter can help you get the funds you need for your small business.
Crowdfunding campaigns help entrepreneurs collect donations from donors.
Business Grants
Business grants are another financing option that you can opt for.
A business grant is funds provided by the government (federal, state, or local), a company, or a philanthropist.
Business grants are essentially free money, meaning you don’t have to repay them. However, they have very specific eligibility requirements, making them generally harder to qualify for.
Pitch Competitions
Pitch competitions are best suited for startups or small businesses working in an incubator.
In pitch competitions, you can also win cash prizes and get support from other investors.
However, this type of financing is best for established businesses that want to expand rather than startups.
Peer-to-Peer Lending
Peer-to-peer lending or social lending allows individuals to borrow and lend money to and from one another.
To make it easier to understand, this type of financing is like a combination of crowdfunding, loans, and an angel investor.
Check out sites like Funding Circle, which are great pitching online platforms that help connect you with potential investors.
How To Find Angel Investors: Final Thoughts
Securing funds for your startup or small business is a crucial moment in your journey.
However, going through the process of finding said capital can be a stressful one, especially for first-time founders or inexperienced business owners.
Angel investors invest their own money in a business or startup in exchange for equity.
However, finding these angels will be hard. There are only so many ideal methods for finding them.
Some founders find investors online, some through connections.
But the steps above can help you increase your chances of success.
You must first research and create a solid business plan to find angel investors.
Then, you can reach out to close friends, family members, business groups, and more to grow your connections.
Having an angel investor offers numerous benefits, such as growth, mentorship, and credibility.
If you’re really struggling to find these investors, don’t lose hope! There are still plenty of alternative financing options, such as crowdfunding, grants, pitch competitions, etc.