08 February 2020
You might have heard about angel investors in the context of television shows like Dragons’ Den. If not, this guide will explain what they are, how to find them, how they work, what they expect, and what to look for in them.
An angel investor is a wealthy individual who offers start-ups and entrepreneurs financial support in exchange for equity in their firm. Unlike venture capitalists, they generally use their own money to do this. They also tend to invest in companies at a relatively early stage of development.
The traditional method of finding angel investors involves attending tonnes of networking events and getting the word out about your new business. This can be a great way to find yourself a financial backer, particularly because you get to meet them face-to-face and see if they’d be a good fit for your business before you go any further.
Nowadays, there are loads of websites out there that will allow you to browse a network of investors and contact them directly. These sites will put you in touch with loads of top-level investors and provide you with all of the information that you need to make an informed decision. The only drawback is that it can cost money to post your pitch.
Once you’ve found an angel investor, they’ll expect you to make them a pitch. Depending on where you find them, this pitch could be made face-to-face or via a video call. You’ll need to outline your business proposition, provide financial forecasts, and outline an exit strategy (more on this later).
If your pitch is successful, then you’ll enter into a working relationship with your angel investor. They may want to be highly involved in your business (particularly if they have a large stake in it). Other investors, on the other hand, will be happy for you just to get on with the day-to-day running of your business.
Make sure to establish the level of involvement and control that the angel investor will have from the outset. You don’t want to find yourself in conflict with them when they try to intervene at a later stage. Equally, it might be useful to have involve them in your business – some angel investors have loads of contacts and experience that could really help you out.
It can be a tough battle convincing angel investors to get behind your business. That said, the reward is definitely worth all the effort. With the right knowledge about what they’re expected from you and your business, you can make life a lot easier for yourself.
Before you go into a pitch, make sure that your concept is solid and clearly articulated. You should be able to sum it all up in just a few sentences – in fact, this should be how you open your pitch.
Try practising by explaining your business proposal to a friend or family member. If they don’t get it straight away, look for a more intelligible way to explain it (if they still don’t get it, it might be a good idea to go back to the drawing board!)
One of the top priorities on an angel investors list is looking for evidence that your business will grow in the future. You’ll need to provide financial forecasts that demonstrate the potential of your firm.
Don’t oversell yourself: make sure that your forecasts are realistic and based on concrete data. Show the investors that you’ve based your predictions on genuine business performance figures.
Entrepreneurs and start-up owners often overlook one seriously important element of the pitch. You need to make it clear what the investor’s exit strategy is.
They won’t be looking to form a lifelong partnership with you. Angel investors want to turn a profit from their investments within a couple of years so that they can go elsewhere and re-invest, so be upfront about this in the pitch.
Forming a decent partnership with an investor is a two-way street: make sure that you impress the investors, but be sure to check that they also suit your businesses needs.
This might mean looking for an investor with the right kind of industry-specific knowledge and experience. Alternatively, you could be looking for someone who is in contact with the right people, be they distributors or social media influencers.
A vital consideration when looking for angel investors is that you have to watch out for scammers, particularly when searching on the Internet. Be very wary of unsolicited investment offers that you receive online. If a potential investor offers you very attractive terms but asks for a deposit while they carry out checks, don’t take them up on this!
You should know what an angel investor is by this point – remember, they’re different from venture capitalists because they invest their own money and they’re usually looking for equity in your business. You can find them by attending networking events or by posting on dedicated sites online.
Before you get your financial backing, you’ll be expected to make a pitch. Make sure that you’re able to articulate your business concept with clarity and include realistic, data-driven financial forecasts. Don’t forget to discuss the investor’s exit strategy.
Finally, it’s important to make sure that potential investors are good for your business, too. You might want to look for industry-related expertise or someone who knows the right people. Last – but certainly not least – make sure you don’t get scammed by fake investors online!
We hope that this guide has given you all of the information that you needed about angel investors and how to find them. If you manage to get the backing you’re looking for and need to rent some workspace, choose BizSpace to benefit from flexible, affordable renting options on a range of different property types.