Once owner(s) formulate a plan for creating their offering and bring it to market, they may consider angel investors as a way to raise enough capital to get a company off the ground.
What Are Angel Investors?
Angel investors are often high-net-worth individuals who sometimes have experience in your industry. Sometimes, your family or friends could be considered angel investors, but angel investors can also be third parties who are simply interested in your offering and its success. Besides the capital they infuse into your business, angel investors can be valuable because of the advice and guidance they can offer.
When Should I Reach Out to Angel Investors?
Angels invest early in your business, typically during the “pre-seed” or “seed” rounds. They generally make investments in companies that are beyond the ideation phase and have a minimum viable product that is ready to go to market and get feedback; many times, this is before the product has gotten any traction in the market.
Angel investments typically range between $25,000 and $1 million.
How Should I Reach Out to Them?
When it comes time to raise angel capital, make sure to reach out to your immediate network. You may unknowingly have a wealthy aunt who invests in early startups or a friend with disposable cash and experience in your industry. Networking is generally a very wise strategy when it comes to raising capital. Angel investors can also be part of angel-investor groups.
How Do I Pitch to Angel Investors?
An angel investor usually wants to see that you’re going to use his or her money to take your business to the next level. As such, it’s important to outline exactly what you need the capital for, what you’re going to use that capital for, and what the expected outcome will be when you execute your game plan.
How Do I Manage the Relationship After They Invest?
It’s important to treat all of your investors with respect and keep them informed with updates on your business. If you have an experienced and knowledgeable investor, take advantage of that. Some entrepreneurs have weekly check-ins to celebrate successes and discuss issues the business is facing. A knowledgeable investor can help identify problems and discuss potential solutions.
What About Potential Pitfalls?
Usually, successful investor-business relationships include respect, compatible work styles, and very clear written agreements.
By conducting research and considering your options, you can make an informed decision about whether angels investors might be a good fit for your business.