How to Find Angel Investors for Your Business
For businesses in need of capital there’s a wide variety of potential investors to consider, all of whom have unique skillsets & could offer different benefits. Angel investors, in particular, can be an integral partner for early-stage startups, helping you with planning growth & the practical challengers of scaling your business. And you might be wondering how you should go about finding an angel investor for your startup.
First let’s take a look at what exactly an angel investor is, and what differentiates them from one of the most common sources of business investment, venture capital firms.
Angel Investor vs. Venture Capitalist
Angel investors and venture capitalists both offer a different type of equity financing. There are key differences between each that will help you figure out whether or not you should be approaching angel investors. One of the primary distinctions is where the capital actually comes from.
What is an angel investor?
An angel investor is usually a business professional, entrepreneur, small business owner, or even a corporate leader who is looking to take on risks of investing in brand new business, companies and startups. On the other hand, a venture capitalist firm is typically backed by partners who are looking to get major returns from their investment within a specific period of time. Oftentimes an angel investor will likely have very different motivations than a venture capitalist—an angel investor's motive might be personal interest whereas a venture capitalist is likely going to be focused purely on the potential returns.
An angel investor has to meet the set guidelines by the Federal Securities and Exchange Commission (SEC). The following are the guidelines they must meet:
1. Individual or joint with spouse – net worth of over $1 million
2. Individual with an annual income that exceeds $200,000
3. They must have a joint annual income that exceeds $300,000
An angel investor's value to a start-up is likely to be much more than pure monetary value. A lot of these investors are going to offer relevant business experience, and they will be fully aware of the different risks associated with the investment prior to making it.
These differences in expectations in ROI also come with a difference in the financial support & resources Angel Investors/Venture Capital firms are willing & able to offer. An angel investor will typically be able to offer financial support that ranges from around $1,000 to $100,000 (although there may be instances where they are able to offer more). VC firms, though, will typically offer substantially larger investments that can range from $100,000 to over $5 million or more.
Entrepreneurs typically look towards their family and friends when they are looking to get seed money to start-up their business. Angel investors provide not only seed money to start your business, but they will also be making a time investment in you and they will want to know who they are placing their trust in prior to writing a check for you and your business.
It can take a lot of time to find someone willing to place a bet on you. Angels are not only going to be providing you with start-up funding, but they are also going to be placing a bet on you as a founder. Because of this, you typically won't be able to find one by using traditional methods like cold calling, simply because you have to build a strong sense of trust in your responsibility to your business & customers.
That said, one fantastic first resource to turn to is this regularly updated, open-source document that lists HUNDREDS of the largest female angel investors, along with the type of investments they typically make (seed, early stage, etc.), what geographical regions they typically work within, and some basic social media information:
U.S. Women Angels Investors Airtable (Downloadable)
Attending Angel Investor Events
One of the best ways to start reaching out to potential investors in more personal ways is by attending to angel investor events. Being able to put yourself live in front of angel investors who are in the process of looking to fund businesses is one of the best ways to get attention.
SheWorx offers an ongoing series of online & in-person interviews, talks & seminars with venture capital & angel investing vets, and you can check out SheWorx Upcoming Events, and make sure you sign up for our newsletter so you’ll be the first to know when a new event is announced.
You can find a lot of other fantastic online platforms like FundingPost which arrange these events for entrepreneurs, so you’re able to meet face to face (our virtually) with prospective investors. StartupGrind is another platform with a great list of events.
Ask Locally
The single best way to connect with angel investors is through old-fashioned networking. You should be looking to figure out which investors are actively looking to invest in businesses that operate within your industry. Get out and meet people that are active in your community including accountants, bankers, and even attorneys. That way, you can find people to connect you with the right angel investors looking to make investments in start-ups like your own. You never know when you will be able to make the right connection that yields big returns.
You should be looking to shop for different names in your area because a lot of angel investors stick to their local markets. They do so because they have more awareness of local markets, and to remain close to the businesses they are funding so they can be active participants in their development and growth.
Nowadays, a lot of entrepreneurs also use different online databases in order to connect with different investors. While using these tools is certainly valuable, the best way to approach someone with the aim of getting them to invest is by getting personally connected.
Angel Groups
An angel group or network is essentially a group of investors who put their resources together in order to invest in a lot of different companies. For an entrepreneur, these groups can help ensure you are able to present your idea and business to a bunch of investors at once. This can help you find the right investor and it can help you generate more funding.
Angel groups can be much easier to find. For instance, the Angel Capital Association (ACA) is a professional alliance of angel groups that operate within North America. By using their database, you should be able to sort through over 400 different groups.
Finding the right investor can be difficult for any start-up. The best option would be one that you have managed to connect with and have garnered trust with.
The right choice can provide you with everything from the financial help you need, but also additional resources and intellectual capital in order to help your business achieve success. Networking is the best way to find the right angel investor for your company.