There are many challenges that come with starting a new business, and finding adequate funding is one of them. Without access to capital for launching a start-up, entrepreneurs will struggle to reach their business goals, causing progress to halt either temporarily or altogether.
Money mismanagement is one of the most common reasons for start-ups to fail within the first few years of launching. In fact, 29% of all start-ups fail due to inadequate funding. Needless to say, money plays a huge role in the success of any start-up, no matter what industry they are in.
Fortunately, there are ways to get around this common issue. One of them comes in the form of an angel investor.
As the name might suggest, angel investors are investors that swoop in and save the day with their private access to funding. Their finances can be used to support and push forward your start-up in its beginning phases until the business is generating its own cash.
An angel investor can be the defining factor in whether or not your start-up is successful, and learning more about them is integral to your chances of finding one. We’ve dived in and gone through the finer details about what angel investors are, and how you can secure one for your start-up.
What Are Angel Investors?
Simply put, angel investors are investors that play a core role in supporting a start-up. They have attracted this romantic title due to the high level of security and relief that often accompanies the arrival of their funding.
The main difference between an angel investor and a venture capitalist is where the funding comes from, and what their motivations are. Venture capitalists usually come from an experienced firm of partners who are motivated almost exclusively by profit and growth potential.
They are typically professional or experienced investors skilled at identifying marketability and maximizing their returns. While venture capitalists are a highly valuable asset to any start-up, they are not always the most accessible form of funding—that’s where angel investors come in.
An angel investor is typically a wealthy person who is looking for somewhere to invest their excess capital. They are not necessarily an experienced investor, but they are often knowledgeable in money matters and fully capable of supporting a start-up.
Angel investors can be motivated by personal connections, family ties, or social obligation. They might not be able to offer as much funding as venture capitalists, but they can offer accessible, substantial funding when others can’t.
How To Find Angel Investors For Your Start-Up
If you are at the beginning of a start-up project, the subject of funding has probably been on your mind. Without initial capital, progressing forwards with business plans is near impossible—which is why you and the team should know how to find angel investors for your start-up.
1. Establish an airtight business plan
Before you can even think about finding an angel investor, you need to have all (and we mean all) of your ducks in a row. Even if your angel investor comes from a family connection or does not have a huge amount of experience with start-ups, your team owes it to them to deliver an airtight business plan.
You should have a comprehensive plan which details every step of the way, from funding to marketing to revenue. You need to have all the information spread out in a simple, sensible digital format so that potential investors can understand your vision.
2. Make networking a priority
One advantage with angel investors is that they can come from just about anywhere. Unlike venture capitalists (who only accept funding requests based on credentials and professional reputation), angel investors could be a distant relative, ex-boss, or even a mentor.
What’s important is that you and your team put yourselves out there and network with verve so that no opportunities for funding are missed. Attend workshops, go to conferences, sit in on meetings with others in the same boat. You might just make a connection that saves the day.
3. Be thorough in your research
Before getting too excited about an angel investor, it’s extremely beneficial for you to perform thorough research on what exactly you need and why. Create a to-do list for researching and make sure you tick off every single task. Once you find an investor, they will want to know everything about what your ambitions are and why you think you’ll be successful.
By conducting thorough research on your start-up’s vision, value, marketability and flaws, you can attract an angel investor that both understands your mission and believes in it. Don’t be afraid to include your start-up’s weaknesses as well as its strengths. It takes a strong start-up to know where it is vulnerable and where its potential truly lies.
4. Seek out angel groups or syndicates
A more professional way to go about finding an angel investor is to seek out angel groups or syndicates. Many angel investors tend to network between one another and connect with those within the community, making them easier to target in large groups.
Searching the internet for angel investor forums or groups is a good place to start if you are still wary of large physical gatherings. Start-up communities like AngelList make this process easy, and you can access it from anywhere in the world. You may also be able to find single-investment venture capitalists in institutional investment groups online.
5. Cultivate a relationship with an attorney
Last but certainly not least, making connections and relationships with attorneys can make your trajectory as a start-up much smoother. Investment deals are a serious business, and you don’t want to be on the wrong side of the law when it comes to funding.
Connecting with an attorney that has experience in overseeing investment deals will be of great benefit to both your start-up and your angel investor. That way, everyone knows where the lines are drawn, and there is a much smaller risk for miscommunication.
Angel investors are a great way to get your venture off the ground. If you need funding, you now know where to look and how to go about attracting their interest.
Here’s to getting that capital that can take your start-up to success!
This article is a guest blog written by Brandi Hawkins. To contribute a guest post to Workast.com, please complete the expression of interest form here.