There is hardly any small business that doesn’t need cash at some point during its business. While there are many options for a cash injection, business owners have recently begun to pay more heed to the angel investors in order to fulfill their cash requirements.
Finding angel investors is not easy. You need to be very specific in your search.
There are many funding options for small business, but angel investors are regarded as one of the most favorable. Let us discuss some of the successful means to find an angel investor for fulfilling the cash requirements of your business.
Attributes to look for in an Angel Investor
It is much easier to find angel investors when you are looking for a specific investor to suit your profile and requirements.
A typical angel investor will have the following attributes:
- Having an income of more than a hundred thousand dollars.
- Having a net worth of more than a million dollars.
- Having an age limit between forty to sixty years
- Having previous experience of being an entrepreneur
- Having the ability to hold the investment for a few years (ideally five years)
- Having a flair for entrepreneurship and the ability to understand the intricacies of the business.
- Having the capacity to invest more than a hundred thousand dollars, but ready to work with a syndicate of similar investors in order to increase the total investment amount.
- Having the right connections with other angel investors.
- Having technical know-how and market mechanics of the industry for which the entrepreneur is seeking investment.
It is obvious that the angel investor will be seeking to make money with their investment. But, they should also be ready to wait for a few years until their investment starts paying off.
Seek an Investor Closer to Home
Most angel investors would like to play an active part in the business they have invested their money in. This means that they would like to be around when the business starts its operations.
That is why they would prefer making an investment in a venture that is in close proximity. Most of them would also visit the business owner and talk about the business’s operations.
If the investor is geographically far from the business, they will find it rather difficult to keep an eye on their investment.
Networking, Networking, and Some More Networking
In many cases, the entrepreneur who is planning to start a business is referred to the angel investor through an intermediary. This means having connections with the right people who can refer you to an investor.
Again it will require some serious networking efforts from the entrepreneur. You should be widely known in the local business community. In fact, you should also be a well-known person in the social community in which you are planning to operate.
While making your networking efforts, you should emphasize on the business owners within your community. These are the people who are operating their businesses. They are bound to know a few angel investors. In some cases, they will also be willing to become angel investors and put their money in a promising new enterprise.
It would be a smart move to join the local business and trade organizations and make sure not to skip any of their meetings or seminars. Also, it would help if you present yourself in all the local trade fares and business events. Being part of the social organizations active in your community is also great for networking. The more people know you in the community, the more chances you have of getting referrals to angel investors.
Seek out an Active Group of Angel Investors
There are a few angel investors who want to operate alone, but most of them would prefer working with other investors.
Usually, the group of angel investors will create an informal syndicate that will allow them to pool all their resources. They will also be ready to share the risks associated with the investment in case the business does not become successful.
If you regularly check up with local business development centers and economic forums in your area, you can surely find more than one group of angel investors within your own community.
Use the Internet to Connect With Angel Investors
You can find an angel investor or a group of investors through one of the many websites that serve as platforms for matching entrepreneurs with investors.
Another advantage of using these websites is that you can share your ideas with a large audience through these platforms.
Offer all the Required Information about your Business
A term sheet is something that offers you the opportunity to let the investors know all about your business, and how they can reap benefits from it by investing their money.
You must prepare the term sheet from the perspective of the angel investor.
An investor’s first and foremost concern is the protection of their investment. Investors will analyze the term sheet in order to assess the financial strength of your business.
Investors are good at deciphering numbers. They are also aware that many people would engineer numbers in order to woo investors. This is something that they will never approve of. Therefore, it is best if you are honest with your numbers and let the investor know the exact position your business is in at any given time.
Investors will also be looking at your plans and how you seek to make profits from your business. It would be best if you let them know that you have a workable plan. Inform them about your marketing strategy and how you can penetrate the niche. In addition, you should brief them about what makes your product unique, and how you plan to sell it to your customers.
Your plan should be presented in such a way that the investor can understand it easily, and also comprehend your plans in order to gauge whether they are viable in the long run.
Once the angel investor is satisfied with the data, they will have no qualms about approving the loan that you are seeking.
The Final Word
It is not difficult to find an angel investor, but compelling them to invest in your business is. Whether an angel investor agrees to invest in your business on favorable terms, highly depends on your business plan. Therefore, you must offer a unique plan that proves to be profitable.
Some of the ways of finding an angel investor are stated above. You can be more creative in your approach, and seek an investor or a group of investors that suit your cash needs.