Obtaining angel capital is not an easy process and can be extremely competitive. An entrepreneur can follow several strategies, so they can increase their chances of receiving angel funding. Angel investors primarily look for 6 important components when agreeing on an investment:
1. The promise of a large ROI
Angel investors expect more than just getting their money back—they also seek a profitable return on an investment since their investments tend to be high risk. As one financial analyst claims, “For every dollar that an angel puts into a company, s/he would like to take seven dollars out after taxes in seven years.”
Angel investors expect more than just getting their money back—they also seek a profitable return on an investment since their investments tend to be high risk. As one financial analyst claims, “For every dollar that an angel puts into a company, s/he would like to take seven dollars out after taxes in seven years.”
2. The rationale behind every investment
Angel investors have a history of being successful entrepreneurs and many are delighted in helping build and create an enterprise that will promote the economic development of a community. Entrepreneurs should give angel investors a legitimate reason to invest in their company and cherish the skills and expertise an angel investor will bring to their enterprise.
Angel investors have a history of being successful entrepreneurs and many are delighted in helping build and create an enterprise that will promote the economic development of a community. Entrepreneurs should give angel investors a legitimate reason to invest in their company and cherish the skills and expertise an angel investor will bring to their enterprise.
3. A promising pitch and convincing business proposal
An entrepreneur should consistently practice and refine their pitch so it will be flawless. In addition to presenting a promising pitch, angel investors also desire to see an entrepreneur’s business plan, detailing the ideas and objectives of their company. This business plan should include any financial projections, comprehensive marketing plans, concise details about the target industry, and who the prospective consumers will be.
An entrepreneur should consistently practice and refine their pitch so it will be flawless. In addition to presenting a promising pitch, angel investors also desire to see an entrepreneur’s business plan, detailing the ideas and objectives of their company. This business plan should include any financial projections, comprehensive marketing plans, concise details about the target industry, and who the prospective consumers will be.
By preparing a flawless pitch and strong business proposal, the entrepreneur will undoubtedly increase their chances of obtaining angel capital. They should also tailor their pitch and business plans according to the type of angel investor they are planning to pursue. There are three major types of angel investors that business owners should be aware of.
- a. Angel investors concerned with economic gain- these investors are motivated by the prospect of a large economic reward, especially if the company gains public recognition.Entrepreneurs who seek these types of angel investors should not only stress the purpose of their business idea(s) but also mention shareholder percentages and ROI in their pitch and business plans.
- b. Hedonistic angel investors- these investors are attracted to investing because of the thrill associated with risky ventures. They also believe that the entrepreneur’s concepts are worthwhile and desire to help the entrepreneur market their innovative ideas. While the process of successfully obtaining angel capital is an extremely competitive process, new business owners who seek funding from these investors should have a well-prepared, convincing pitch and business plan.
- c. Altruistic angel investors- these investors take pleasure in helping young companies thrive and enjoy promoting community development and job growth. Entrepreneurs who seek capital from these types of investors should perhaps stress the advantages of economic growth in communities and economically sound technologies.
4. A solid management team
To attract angel investors, an entrepreneur must also present a solid and trustworthy management team that is skillful, competent, and experienced in their industry. The entire team should have a firm record of success, be knowledgeable on marketing products and services, managing employees, and have insight on conducting proper financial matters. It is a proven fact that a strong management team can contribute to the successful growth of a company.
To attract angel investors, an entrepreneur must also present a solid and trustworthy management team that is skillful, competent, and experienced in their industry. The entire team should have a firm record of success, be knowledgeable on marketing products and services, managing employees, and have insight on conducting proper financial matters. It is a proven fact that a strong management team can contribute to the successful growth of a company.
5. Proper business structure and organization
An entrepreneur’s business must be properly structured for investment. This includes an angel investor’s percentage of ownership as part of the business deal. Angel investors are also likely to be involved in company operations through active mentoring, management, or being a member of the board. Most angel investors will expect this type of formal agreement, as well as a large return on investment, in exchange for providing the new company with the needed business capital.
An entrepreneur’s business must be properly structured for investment. This includes an angel investor’s percentage of ownership as part of the business deal. Angel investors are also likely to be involved in company operations through active mentoring, management, or being a member of the board. Most angel investors will expect this type of formal agreement, as well as a large return on investment, in exchange for providing the new company with the needed business capital.
6. A well-defined exit strategy
The entrepreneur and angel investor should agree upon a time frame for the investment. This means that for a given period of time, the angel investor will provide the needed capital, expect to be actively involved in a company, and will anticipate an exit after that phase comes to an end. The most common exit strategy of an angel investor is through the sale or merger of a company.
The entrepreneur and angel investor should agree upon a time frame for the investment. This means that for a given period of time, the angel investor will provide the needed capital, expect to be actively involved in a company, and will anticipate an exit after that phase comes to an end. The most common exit strategy of an angel investor is through the sale or merger of a company.
source-go4funding
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