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Angel investors are wealthy groups or individuals who give money to promising businesses in the hopes of getting huge capital gains down the line. The main goal is to find a company that has what it takes to become the next big thing, and then to help them on their way by offering money, expertise and connections in return for equity. When the company goes big this equity multiplies in value, making a big return on investment for all involved.
With established industries being disrupted left, right and center, it’s been said that there has never been a better time to look for an angel investor who can help you get your company past its tipping point.
Finding an angel investor can be difficult, and competition for their attention can be fierce. There are, however, some ways to get their attention. Angels can be both individuals and groups, but both can be found in similar ways.
Before you go about attracting investors, make sure you’re ready to put your best foot forward. Just like going on a first date, making a bad impression means you probably won’t get a second chance. Before you even start soliciting investors, make sure you’ve done the following:
You will need to convince angels that you can turn their money into even more money. To do this you need to convince them that the product or service offered by your company is able to make it happen. It must not only be profitable, but also in demand.
Can your brand go worldwide, or will it always be focused in America? Will your customers keep buying more, or will they only ever buy once? An investor will want to know about this before deciding whether or not to get involved.
The facts and figures are the evidence you need to convince investors to jump aboard. Angel investors are keen on seeing determination and passion, but only if it comes with the right numbers.
When an investor offers you money they’re offering you a deal. Remember that you are under no obligation to accept it, and that not every deal will be right for your company. They will typically want equity in exchange for financing, and/or may include repayable debt schemes or similar.
Jennifer Holland’s fifteen-month-old had a sore throat when she visited her doctor. With a light in one hand and a tongue depressor in the other, the doctor asked Jennifer to restrain her child while they take a look. There was a moment of bafflement as Holland wondered why they didn’t simply use light-up tongue depressors. A quick Google search revealed that such a thing didn’t yet exist in a cost-effective package.
Throat Scope was born a month later, as the world’s newest manufacturer of cost-effective, patented light-up tongue depressors with disposable wooden blades. Not long after that Holland found herself on Shark Tank, making her case for investment in front of several angel investors.
It was a unique product with global potential, produced by a well-managed company with a clear vision. Holland walked out of that session with a $76,000 investment, while her angel investor got a 30% stake in the company and a deal for 5% of the royalties until that money was paid back.
However, Holland also got some valuable business advice. Taking a close interest, Holland’s investor urged her to take on more people. With that $76,000 she hired a corporate director and a commercialization director. The former raised even more capital, while the latter inked a number of worldwide distribution deals. All of a sudden, Throat Scope was ready to go global.
Holland’s angel investor provided $76,000, but the advice he gave her turned out to be just as important. Meanwhile, Jennifer had to give up 30% of her equity pie, but because she did so the pie itself got a lot bigger. With both the angel investor and the business owner doing their part, everyone wins.
Venture capital is about making big returns, and angel investors correspondingly tend to prefer a few particular industries including:
If you are in one of these industries then your odds of attracting investment might be better, but that doesn’t mean it’s easy. Correspondingly, being in other industries might make getting investment more difficult, but that doesn’t mean it’s impossible.
If your company ticks these five boxes, then it’s a good candidate for angel investors. It has…
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