What Is an Angel Investor and How Can They Help Launch Your Startup?
By: Ahmad Ali
Tags: Startup, Finance, Investing, Entrepreneur, Business

How to attract angel investors?

For attracting angel investors, there are some cool strategies that you can use to get them to invest in your business. Here is the quick list.

Prepare the basics

The first and most important is to get the basic things done correctly. Have a competent and fantastic idea and a business plan that is concrete and compelling.

Mention how you market your business, your targeted customers, and the realistic future predictions. Also, include the successful feasibility test report to help your angel understand that your idea has power. If you get your hands strong on these factors, you can easily convince your angel.

Try to get local angels

Angels exist everywhere, local, national, and international. But the problem is mostly international angels don’t invest to avoid the risk of fraud. They want to invest where they can regularly discuss business operations and plans. In short, it means they have a hold on the business.

So try to pitch local angels where your business is located. Get into local communities and groups that have related investors with expertise in your industry.

Allow him to get involved

In most cases, angel investors want to take part in the management along with giving you money. They want to keep an eye on business affairs and like to share their knowledge and expertise to help startups grow in the future.

It is a good strategy for obtaining investment, and you should take care of this thing. On denying these requirements, chances are they don’t invest.

Offer equity ownership

As I early mentioned, angels want equity ownership in the business. There are several reasons for it: controlling the business, earning a greater return, and increasing their wealth.

Equity ownership is also favorable to you from a loss point of view because the angel will share it. You can give them equity ownership either in common stocks or preferred stocks or whatever other options are available.

Provide information in detail

Don’t hesitate to give in-depth details about you and your business to make them more confident to take an investment decision. Tell them about your experience and expertise in the industry of your venture. Present realistic calculations and estimations of risk, return, and future growth.

Share your previous achievement in business. This helps them realize that you’re not a mediocre person who knows nothing but a professional business owner.

Provide the exit door

Around 50% of the businesses angels invest goes out of business, and only 20% scale to a large company. Therefore they are careful about an exit strategy if the business goes against their expectations.

You should mention that point in your agreement. There are lots of exit strategies, like selling out their ownership, IPOs, and mergers. Exit strategy lowers risk for them.

Professional management team

With your expertise and experience, your management team also needs to be well versed in managing a business. Angels become more convinced to invest in a business where the entrepreneur has a good and experienced board of directors, finance team, and marketing and sales teams to manage different business affairs. Finally, you know all of the business success depends on how well it is managed.

Offer reasonable margin

I mentioned earlier that angels try to get a higher return for their investment because they take the risk; that’s why they want seven times to return on their investment. And that is the standard rule in finance that higher risk higher return.

You need to offer them a higher return than all the other opportunities available in the market. For example, stocks, mutual funds, CDs, ETFs, and bonds, etc.

Networking with angels

The final strategy is to have a network with angel groups and communities. Nowadays, the online world makes it so easy for you to find angels. There are many Facebook, Reddit, and Twitter communities devoted to angels where they are regularly present. You can join them and build relationships with them and have discussions to take help. You can also find angels on online lists like Angel list and Dust website.