Just because they are called “angels” doesn’t mean that they gladly dish out money to any entrepreneur who drops by with a proposal. In fact, angel investors are not easy to come by and even if you find them, it is equally easier said than done to convince them to invest in your start-up. They are just like other investors who cannot risk suffering losses on their investments only that they are courageous enough to trust in a business idea that they think can work.
You must therefore ensure that you get everything right when looking for one to invest in your start-up. The following tips should act as a guide in your search for the most ideal angel investor for your business.
Your Business’s Inclination and the Investor’s Interests
Every company or business has a unique vibe that it stands by. The same translates to the investors, they have their own areas of interest and the only way to grab their attention is to go for those with similar interest as the business you have in mind. You might find thousands of angels in your town or state, but that doesn’t mean that anyone can invest in anything. The same reason you chose your specific business type and model is the very reason the investors will also choose what to invest in and what to ignore.
You must go through the profiles of the investors, areas and companies they have funded in the past and choose those with similar industries. Weed out investors who don’t share your brand of commercial tenacity and spirit and find someone passionate about what you think is possible.
There are some sectors that tend to appeal to most investors like software engineering, information technology, biotech, energy and other region-specific sectors. You will be disappointed if you aim large at a mass of investors and fail to curve out a specific niche of angel investors, not because they don’t have the money to invest in your business, but simply because they are not interested.
Use Reputable Connections
Just like is the case with job recommendations where employers prefer hiring people who are directly recommended by other employers to those they know nothing about, it is also useful to build credible connections in investment circles if you are to find the right angel investor for your new business. Unlike directly approaching the investor and launching your case, a business connection can do the introduction bit for you.
This does not only make your work easier, but also boosts your credibility. You can join investment groups or use individuals working in the inner circles of angel investment. You might have an interested investor but from a different industry who can easily link you up to someone else ready to invest in an area that interests you.
Not everyone who claims to be an angel is really one; some are real wolves-watch out. This might sound like rude but it is true. Just because someone invested in your business doesn’t mean that he or she has to nose around every aspect of your business and even force you to shift away from your business model simply because they want their returns on investment so badly.
A real angel is one who, before deciding to fund your startup, believes in your capability to realize your targets and ensure that you honor your end of the bargain. Financial partners with dictatorial tendencies should be avoided, even if they choose to invest fully in the business. Real angels take minority stake, avail the much needed and essential capital and then sit back. This leaves the entrepreneur with the freedom to run the business and make routine decisions without being reminded what is at stake.
To avoid all these inconveniences, plainly define your expectations on the rights of the shareholder and set levelheaded goals for the business and timeframes.
Some entrepreneurs get so excited about their businesses that they sometimes promise angel investors what they cannot deliver. It is not possible to fire investors the moment you accept their money and sign the contract. You must therefore ensure that the contract is realistic and attainable. Don’t be so desperate that you pledge so many returns on their investment that you cannot keep.
If an investor asks for too much, more than you cannot possibly give, you will be much safer and happier working without their money. Find some other angel or other sources of funding that will not try to ask for the impossible.
Finding the right angel investor calls for proper research, establishment of credible connections, realistic business plans and a common brand interest between the entrepreneur and the investor. You must ensure that you understand the angel well, his or her expectations from the business and your own business model. As much as it is hard to raise capital to start a business, you must never enter into a financial partnership with an angel investor who will make your operations painful. Consider the above mentioned tips and avoid the wrong investors.