Knowing where to find angel investors can make or break a startup. Angel investors play a critical role in ensuring that companies thrive in their earliest stages. These investors provide much needed financial capital for a business. However, more than that, they also bring significant expertise. Many times, angels sit on the board of directors in the early stages and help guide the business to success. After all, they typically have experience creating successful companies that allows them to invest the money that they do. They help early-stage companies avoid costly mistakes and also ensure they have a clear roadmap for growth.
Given how critical angel investors are, many startups will seek them out during their early stages. However, many founders are unsure of where to find angel investors. It’s not like you can walk into a store off the street and find someone willing to invest in your business! To better understand how to find angel investors, you should first consider the type of person an angel is.
Knowing Where To Find Angel Investors Starts With Understanding Your Target Market
Finding an angel investor is probably the most significant first marketing task for a company. Instead of trying to sell a product or service for money, you’re selling equity in your company. However, the standard principles of marketing still hold. You need to define your target market, which is not just an investor that will be willing to invest capital but rather one that will also “invest” their expertise to help your business thrive.
The average angel investor has a few characteristics. First, they have quite a high net worth and income. Usually, angels are worth more than $1 million and have income that is well into the six-figures. They typically like to hold their investment for a few years. Angels are not looking for a quick turnaround on their money, so long as you have a plan for them to see a significant ROI within five or so years.
Angel investors also typically enjoy advising entrepreneurs, and they will often ask for a seat on the board of directors in exchange for their investment. Since they enjoy encouraging promising talent, they tend to like to invest in companies in an industry with which they are familiar. You are unlikely to receive an investment from a tech angel investor if you are planning on selling car parts. They wouldn’t have the expertise to guide the business to success properly, and therefore that investment wouldn’t make much sense.
Another property of angel investors is that they tend to be accredited investors, which gives them the ability to invest in pretty much anything, including your business. The SEC takes the “guardrails” off, so to speak, with accreditation, which opens up a wide range of investing possibilities.
Given that angel investors provide both expertise and capital, the first step when looking at where to find angel investors is to define your ideal angel. If you are a tech company, your target investor would be someone that has experience in the past investing in tech and assisting them in achieving great heights through advice and networks. You wouldn’t want angel investors with a track record of investing in promising health care businesses.
Define your ideal angel investor before you start looking. Then, once you know the type of person you’d like to have on board, the next step is to find someone.
Places To Find An Angel Investor
Aspiring entrepreneurs used to have difficulty finding angel investors, however, thanks to the internet, that’s (mostly) no longer the case.
You will likely not have much success, “pounding the door,” so to speak when it comes to investing. Your best bet will probably be to go to a forum where angel investors and aspiring entrepreneurs meet.
There are a few significant associations that foster these types of connections. On the west coast, there are the Tech Coast Angels, Investors’ Circle, Band of Angels, Alliance of Angels, and Pasadena Angels. On the east coast, there are the New York Angels, Hyde Park Angel Network, North Coast Angel Fund, and Golden Seeds. Each of these networks has over 100 angels and invest various amounts. Many of them are willing to invest up to $1 million, although you might find investors that are willing to do more. Given that most initial investments are in the $100,000 range, each of these associations would be able to provide enough capital to help propel your business to new heights.
You can find other angel associations in your area on the Angel Capital Association‘s website. This association acts as an intermediary between investors and entrepreneurs. Accredited investors from all across the United States register with this association, and they host events all over the US for companies looking to find funding.
Of course, these are not the only places to find angel investors. Often, if you have an extensive contact network, you can ask around for who similar companies in your space got to invest in them and pitch that investor or group of investors yourself. Accountants and lawyers that work with early-stage companies might be able to point you in the right direction. They may know of an angel investor that likes your business’ domain from having worked with them in the past. For example, if you learn that John Doe wants to invest in companies like yours, then you know that that person is interested in this space. Therefore, you can pitch that investor to see if they want to be a part of your startup.
Finding an individual investor is quite a bit more challenging than finding one through one of these associations. You’ll also probably have a more difficult time capturing their attention. These investors likely receive lots of pitches from companies, so getting yours to the top of the pile can be tricky.
These are typically the only two ways to find angels: you either work with an association to find accredited investors, or you do some extensive research to find individuals that might be interested in your business.
Prepare Your Elevator Pitch
Finding an investor is only half the battle. Landing one is a much more challenging proposition. You need to convince an investor that your business is worth them investing in – not just in terms of capital, but money as well. Therefore, before you meet with an investor, you’ll likely want to prepare your “elevator pitch” well in advance.
Angel investors frequently invest in ideas with potential and are slightly less concerned with concrete numbers than later investors are. They’re less about investing in the business, per se, and more about investing in you and what they think you can achieve. An angel investor is putting their money into a business seeking high returns. They need to have the belief that you will be able to deliver on your visions to make their money back.
Therefore, while financials are essential in your elevator pitch, you want also to emphasize the talent that your business has. Emphasize your business acumen, the expertise of your partners, and how you will be able to turn your visions into reality. If you’re seeking outside investors, you likely already have a talented team that’s working within your business. Let that shine through your pitch so you can provide your potential angel investor with the confidence they need to put their money into your business.
Put together a deck that lets your expertise shine and shows them why this is a great business opportunity. Think about it as a chance to explain why you and your partners have the unique skills necessary to tackle this market and make significant financial gains from it.
If you make your pitch to an investor and they decline to invest, take any feedback they have to improve your elevator pitch. There are thousands of angel investors across the United States. Not having one pick your business is certainly not the end of the world. Take the feedback and use some of the resources above to find another investor!
Where To Find Angel Investors: Target, Search, Pitch
Knowing where to find angel investors starts with first defining what type of investor you want. You typically want to find someone with expertise and an extensive network in your business domain. If you’re a tech startup, then you want an investor that is familiar with the tech scene. Similarly, if you’re a promising medical startup, you want someone who has a history in that space.
After you define the type of investor you want, you can search through various associations and websites to find these investors. The Angel Capital Association is a fantastic place to start as they have many investors registered on that site. From there, you can look at other independent investment organizations, which may be more suited to your particular niche. If you ask around, you may also be able to find individuals that are willing to invest in businesses in your sector.
Finally, don’t forget your elevator pitch! Before meeting with an angel, make sure you have a rock-solid presentation as to why they should invest in you and your business.
Finding a Los Angeles angel investor requires some work, but it’s certainly not impossible. With a little bit of searching, you will be able to find your perfect angel!