They Give You Wings: Angel Investors and Where to Find Them


They Give You Wings: Angel Investors and Where to Find Them

Need money to take your business to the next level ? Don’t head to your bank. Instead, seek out an angel investor to back your venture.

What’s an angel investor? It’s simple. An angel investor provides funding for your new endeavor in exchange for equity in your company. The average investment is around $600K, and many entrepreneurs secure the backing of several angel investors to get the funding they need.

Angel investors are great for companies that have moved past the virtual office phase and need money for product development, capital investment or for a marketing strategy. Since these investors are usually wealthy and may be entrepreneurs themselves, you stand to learn a lot from them as well.

Is there a catch?

In exchange for their money, angel investors get a piece of the action in your company. The percentage can be anywhere from 10 to 50 percent. With that big of a stake in your company, there’s always the chance you’ll get the boot if things aren’t going well. Also, these investors expect a financial return so you may have to take your company public or sell to another company before you’re really ready.

Where can I find an angel investor?

If you’re willing to take the risk, angel investors can be a godsend to entrepreneurs who need capital.  So where can you find one? There are several ways to connect with an angel investor.

1. Old Fashioned Networking

This requires beating the bushes for investors with money to invest. Expect a lot of networking at chamber of commerce breakfasts, small business council luncheons and economic development board meetings. You may also reach out to lawyers, bankers and accountants who may know of people looking for investment opportunities. And remember, angel investors usually like to back companies that are located close to home so look in your own backyard before venturing out to other cities.

2. Online 

The Angel Capital Association maintains a listing of investors who are in good standing with the organization. Investors are divided by geographic region and industry so it’s easier to find a match. AngelList and Microventures are also good places to look for angel investors online. However, since these investors have no personal relationship with you, it’s often a harder route to secure funding.

3. Friends and family

Have a wealthy cousin? Consider asking him or her to make an investment in your company. Your friends and family presumably know you quite well and will feel safe investing with you. While this option often works out well, it’s potentially fraught with peril. If a family member invests thousands in your company and it fails, Christmas dinner becomes pretty awkward. Even so, this is frequently the only option for many entrepreneurs. Just make certain your relative understands the risks that come with the investment and the distinct possibility they’ll lose everything.

4. Angel investor networks

In these scenarios, professional investment managers aggregate invested funds from several angel investors. The investors remain anonymous while the group’s management team screens funding opportunities. It’s easier for investors who pool their money with others and then decide which ventures they want to back, and it’s easier for you since you’re only dealing with one contact at the network instead of several different investors. Many such groups prefer to invest money in companies within a particular geographic region.

5. Fundraising advisers

If all else fails, consider using an outside adviser to identify and pursue investors on your behalf. While these folks can help, especially if your people skills are not so good, they do come at a cost. Most require a “success fee” of 5 to 7 percent in cash once they’ve inked a deal for you, and some require an additional monthly retainer. Plus, they usually won’t take on just anyone. Fundraising advisers must believe they can sell your company successfully before they’ll partner with you.