Angel Investors and Small Business - How to Find an Angel Investor for Business Start Up
If you want to interest angel investors in your startup business,
you will have to convince them that their return on investment (ROI)
will be an impressive one. Note also that they fall into three main
categories—economic, hedonistic and altruistic—and they decide to
invest in companies for various reasons. For example, the hedonistic
type may be motivated by the excitement of a new venture while the
altruistic type may be concerned about improving your community is some
way.
What you should do to attract angel investors
Begin by determining which type of investor you would like to work with
and tailor your sales presentation accordingly. Also, there are certain
things that experienced investors expect to find in any new venture:
● You will need a viable management team that has genuine leadership
ability. Angel investors will look for proof that those who run your
company are competent, honest, and knowledgeable individuals who can
grow along with it. In general, they expect this group to be skilled in
the areas of marketing, sales, production, accounting and dealing with
your staff on a day-to-day basis.
● Angel investors will also expect you to have a comprehensive business
plan, one in which you have outlined your goals and described the steps
needed to reach them in detail as well.
● Your new business should be set up in a way that will attract angel
investors. For example, if you happen to be the sole owner of this
venture, be ready to surrender a portion of that ownership to them.
Some of them may also require a shareholder’s agreement that includes
the type of investment they are making and the anticipated ROI.
● Along with looking for profitability, many angel investors will want
to play an active role in mentoring you and helping your business to
grow that includes serving on the Board of Directors. They will also
look for an exit strategy for themselves, even if the investment is
long-term, such as selling shares of stock to your company’s principals.
● Make sure that your valuation of the business isn’t set too high, and that your projections for future growth are realistic.
Note that most angel investors have an income in excess of $100,000 and
a net worth in excess of $1,000,000. Typically, they are between the
ages of 40 and 60, and are willing to carry the investment for seven
years. They may invest up to a maximum of $150,000 and may also be part
of a group of other investors. (In this case, the total investment will
be much higher and like-minded individuals will be sharing the risk.)
These entrepreneurs also invest in an industry they know well, try to
locate business deals by using referrals, and favor businesses in that
are not far from home, which allows them to take a hands-on approach.
As a rule, you will want to be referred by an experienced entrepreneur
to the angel investor that you feel is right for you. To accomplish
this, try to immerse yourself in your local social and business
community and do some networking. You can concentrate on business
owners, join some industry organizations, and participate in the
meetings as well. Belonging to civic and community can also be useful
in promoting name recognition, along with attending trade shows and
other industry events.
Copyright Rebecca Hubbard | All Rights Reserved
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