“Where can I find an angel investor? A good one! With both the funds and experience to back my project. To push it out into the world. With a loud bang!”
These questions, troubles thousands of entrepreneurs on a daily basis and you are probably one of them. A man on a quest. A man with a dream and vision. But somewhat short on funds.
If so, it’s OK. You’ve come to the right place. This article features brightest benefits and troublesome pitfalls of angel investment.
We also share tips: Dig in and find out how to land the top business angels. Ensure their gentle wings make your startup’s life sweet and safe.
Wait, Angels? Can’t I just crowdfund?
Yes, you can. And you should. In some cases. Unfortunately, Crowdfunding is not a magic wand. It doesn’t solve every issue you might face.
If the crowd loves your idea ( that will be a big IF. Else, you have to convince a lot of people), they’ll back your product. There will be a price though – product shipments.
To make the long story short, Crowdfunding has one enormous benefit you may desire:
- It’s an astonishing way to gain traction, draw potential customers and gain popularity through a public fundraising campaign.
But what about the cons? There are issues worth consideration:
- Crowdfunding platforms charge a certain percentage from your revenue.
- They provide less professional advice compared to investors.
- The amount of money you can raise is limited.
Yes, these issues may seem like minor challenges from the beginning. But, if you have a long-term plan with precise ROI expectations – you might desire additional flexibility. And some support.
The other side of the coin
Angel investment is all about equity. It means you will give a share and some control over your company to the backer. However, it also means that such a person is interested in your success.
Projects that are already off the ground, but not mature enough to sail the big sea on their own are a perfect fit for the Angel scenario. So are start-ups in need of additional funding for whatever reasons like other marketing campaigns or new lines of products.
Angel investors bring a heavy bag to the table. They have experience. They know what it takes to launch and succeed.
What does this mean to you in particular? Angel investment is a risky game. Though, it offers more compelling advantages than crowdfunding. In other words, it’s a bigger bang for your (ok, someone else’s) buck!
But is it worth the effort? Well, consider the following. According to the Center for Venture Research at the University of New Hampshire, two years ago:
- Total U.S. angel investments ran to $24.1 billion.
- More than 73,000 received angel funding, and there were 316,000 active investors.
- Software remained in the top sector with 27 % of investment.
- Average angel investments round to $600,000.
- Most investments are made by groups of investors.
Where can I find high flying angels?
Ok, you are about to let somebody into your very heart and soul, the quintessence of your productivity – your start-up. How can you be 100% sure that an angel investor will do you more good than harm? And how do you know that it is the most suitable one for you and your startup?
The answer lies in additional research. You want a successful player in your team, don’t you? Here are some brief tips you should consider:
- Problem solvers with a successful background in entrepreneurship.
- Well-off people with income ranging from $60,000-$200,000 a year min.
- Technical entrepreneurs with experience in IT Development (It’s 2016 today. No matter what you are working on, your product will be connected to tech sooner or later.)
If your choice were wise, your team would harvest from an insanely important benefit – adequate, result-driven mentor and guidance.
But where can one find their personal Angel? Well, everywhere! Just consider some of the following options:
- Ask family and friends.
- Give networking a shot. Attending IT development meetings and conferences is a proven way to find experts who will be willing to invest into your startup idea.
- Try out AngelList,or other crowdinvesting sites.
- Dig through personal accountants, lawyers or other professionals you don’t know personally for connections.
The #1 rule that will get you funded!
People are more important than mere numbers. Your investor pay more attention to the team! Here is some food for your thought.
Back in 2013 the Harvard Business Review have conducted an experiment. It was based on their working paper: “Attracting Early Stage Investors: Evidence from a Randomized Field Experiment.”
- You’d have to show something that does not exist as for now.
- Improvement of something so as to prompt a lot of people to buy it.
Just for good measure the experiment lasted for 2 months, covered 4,494 investors, 21 startups, and about 17,000 emails. What was it about?
To make the long story short, three types of emails were sent out into the wild. Each of them included the info about the fundraising goal. And, surely, there were differences.
- The first type of e-mails also included the info about traction (data and numbers).
- The second one included some info about the founders/team.
- And the third one had both.
The researchers found that information about the founding team raised investors’ click rate by 2.2%. That’s quite impressive, considering average investor’s’ probability to click is 16%.
In other words, some content about the founding team increased the click rates by almost 14%.
More experienced investors replied only to e-mails with the founding team description, while the least experienced replied to all three types of e-mails.
Such behavior has lead towards an obvious conclusion. Investors prefer your ability to deliver over innovative ideas. One of the research’s primary hypotheses says: “operational capabilities of the founding team may be important at the earliest stages of a start-up, when most experimentation takes place.”
But your team is an important assent in much more ways than one. Barbara Corcoran’s interview sheds additional light on the matter. According to Barbara startups should focus on the following in their search of funds:
- High level of commitment.
- A good team player.
- A sensible idea that will pay back (a commercial idea).
- Horse sense (common sense + street smarts).
Now, that you know what to do, where and how to do it all, that’s left is giving it a shot. Be bold. And remember: even the big boys like Google, Intel, Amazon, Skype and many others were born.Thanks to Angel investments which used to be startups once.
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