Finding Angel Investors

Summary: The closest sources of funding for entrepreneurs starting a business are personal savings and that of family and friends. What if your options stop there? Bank financing is usually out of the picture for small startups.

An angel investor could be your savior. Get some tips on how to find them.

One of the most challenging aspects for people starting a small business is getting enough financing for their business idea. A prospective entrepreneur might have just enough savings to rent out a store as well as purchase inventory. But what about working capital while the store is yet to generate a profit to support itself? He may have friends and families to help plug the funding gap, but what if it isn’t enough? Being too small and without a business track record, bank financing is out of the picture. It is where angel investors come in.

Angel investors are wealthy individuals who help fledging businesses get off by providing them the funding necessary to get them started or going. They can invest from a few thousand dollars to millions of their personal money. They’d usually put in not just money. As these investors are usually retired businessmen or executives, they contribute their expertise and experience by helping the owner manage the business. How does one find angel investors? And what are some factors that can help him snag them into investing?

Where to Look for Angel Investors

Get insider information from members of your local business community. You may have friends who are already in the circle. They are your best source persons when looking for individuals to whom you can sell your business idea. This inside connection is important as usually, angel investments are private transactions. Information about the deal and the investors are not easy to come by. And you can’t expect angel investors to seriously deal with you unless you have a good backing from someone they know and trust.

You can meet angel investors in conferences and symposia. Attend meetings organized by angel networks where you might have the chance to pitch a business proposal. Look in the internet for angel groups and networks. While individual angels may be hard to identify, their groups are more visible. You can start from there. Go4Funding.com is one such platform. Also visit Angel Capital Association and Angel Capital Education Foundation for leads.

How to Snag an Angel Investor

Get referrals from people you know who may be these investors’ trusted sources. Naturally, a person feels more confident in doing business with somebody he knew or someone trusted by somebody he trusts. When referred, take time to establish a business relationship with the prospective angel investor.

Look for one whose experience or interest is related to the business you are putting up. You are in a good position to attract one if you are in the typical high-growth sectors such as software, biotechnology, healthcare, and medicine.

Make a really, really good and convincing business plan. If you want to develop a machine or equipment, build a working prototype. Angel investors wouldn’t risk investing in a business that lacks promise. To get an angel investor to provide you with startup funding, you have to show that the business has a great potential to make high returns.