Angel Investing for Early Stage Start-ups
Angel investors invest in high-potential projects with their own capital, not with VC investors that use big ponds of money pooled from several different parties. The only one investment they generally make.
The more you can match your pitch with each investor, the better your chances of getting angel investments. We can do this by searching the web or merely gaining information about their investment style.
Research
Angel investment can also be an important milestone on the road to startup success. But business owners should take into account how much control they will lose and the return on this investment.
Angel investors generally seek out startups that are solving a specific problem in the market that has the potential to scale fast and have well-established management teams who’ve had experience in multiple industries.
Entrepreneurs must first be pre-screened before pitching her company to an angel group. It guarantees that their history and bank balance are in compliance with any and all guidelines that their angel group chooses to mandate; generally this screening is conducted by either organization personnel or committees and can take days or even weeks to complete.
Networking
Angel investors are ultra-high net worth individuals who give money in return for a stake in a startup that they know well and get appointed to advisory or board roles in return. Angel investors are looking for companies with opportunity for accelerated growth and ROI.
startups with functioning prototype or MVPs and early adoption are more attractive to angel investors since they’re less risky for the investors and demonstrate market maturity. Startups also require a business model, forecast and growth plans.
Make sure to use your contacts for friendly introductions to angel investors. Join industry meetings or online pitch meetings or investor matchmaking sessions via a website like AngelList or Foundr.
Elevator Pitch
Do You Need Start-up Capital? You need a great elevator pitch to pitch startup funding to angel investors. Their time is finite so be nimble and concise when delivering anything to them.
Tell us what is unique about your business value proposition and how it is different from your competitors. Describe market size, revenue stream opportunities, user growth, partnerships. Proven experience with the management team. Use personal references like its contribution to literacy rates to emotionally build the argument in your pitch.
Utilize internet angel investor mingling platforms and angel oriented events (that have angels with similar interests to your business) to practice your pitch and be confident in putting it forward for potential investors.
Due Diligence
Angel investing also involves due diligence. Venture Capitalists review startups for their scalability, growth prospects, revenue forecast and more.
Displaying precise and detailed data conveys to investors that you care about the future of your startup. We need detailed business roadmaps and financial models — market, churn and ROI.
Get ready to talk about hiring new people or strategic partnerships that can make a real difference to your startup’s credibility. They will love the quicker responses to investors questions. Finally, always only raise money from accredited investors; not only is it financially and legally safe, but you save time by eliminating dead-leads.
Negotiation
This kind of angel investor is a lot more hands-on and strategic. They are normally looking for huge returns in a span of seven or eight years.
Startups provide solutions for a large or quickly growing market that is unique to the market, Investors also look at business models that can scale.
And entrepreneur should remember the investor’s desire to make money. A high valuation could turn off investors, while excessive dilution could ruin a startup’s future. With a strong financial roadmap and familiarity with investor terms and conditions, entrepreneurs will have an edge when negotiating; check out NerdWallet’s Guide to Angel Investor Terms and Conditions.
