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What our members have to say...
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Tips for Attracting an Angel Investor
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Even though you may have been rejected by the bank for a small business loan to startup your business, there is angel investment as an alternative. Before you leave your banker's office, make sure you ask for the details of why you were refused the funding so you can prepare to meet an alternative lender. If it was due to a bad personal credit score, begin the steps to establishing good business credit. Make sure you have all your paperwork and planning in order.
Angel investors are private individuals and firms that use their own money to invest directly into a startup or early stage business. You'll already need to have all the groundwork covered before you approach one. Timing is important. Your products should be at the completion stage, having existing customers is good and demonstrating your faith in you business by having your own money in it makes you stand out. You're also going to need a sound business plan that outlines your strategy for rapid growth with expected revenues of at least $15 million over the next 5 years.
An angel investor will also look for these points:
• Your management team's proven its ability to do the job.
• Your product's unique edge in the marketplace.
• The feasibility of capturing your share of the market.
• The viability of your profit margin.
• An exit strategy for the investor that can be attained in no more than 7 years.
Many angel investors join groups and work together, so you may have one or more investors look at your business. Often one of the investors will present on behalf of an entrepreneur to the rest of the group. Decisions about investments are made at these meetings. For this reason, it's important that you network as much as possible with your business community so you can benefit from referrals. Business investors talk to each other and follow up on your statement to prove your validity.
You need to prepare yourself for the reality of having the angel investor looking over your shoulder for the duration until your agreement with them is complete. Ask yourself if you are willing to give up partial ownership of your company for a few years. On the other hand you'll greatly benefit from the guidance and advice offered by individuals that started where you are now and achieved the success you are determined to reach.
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