It’s the angel investors and not the venture capitalists that are likely to get your startup off and running to proving your concept.
They really can be found in the following four categories:
Family and friends
Although there are pros and cons, this group is typically the easiest to access since you already know them and they know you the best. However, there can be difficulties mixing business relationships with personal ones, especially when considering things can go South in a hurry. With 9 out of 10 startups failing, the chances of you losing all you friends and family’s investment are pretty good which makes for some awkward holiday gathering s in the future. The important thing to remember is that these people shouldn’t invest unless they can afford to lose everything. They need to understand the risk and you need to convey it, even if they might be your only option for funding.
The lone angel investor
Because they prefer to remain anonymous and they don’t know you from Adam, these individual investors are the hardest to come by.
These types of wealthy investors who are likely to have others screening any deals are usually looking at multi-million dollar investments not the typical $500,000 for a startup.
It best to find someone who is familiar with your industry and business model and who quite possibly can bring some much needed value to the equation. It’s even better if they have first-hand knowledge and believe they can help move things forward quickly which can mean they might be willing to overlook any trepidation to invest. Determine who some of those people are or identify people they might know who would be able to make any introductions.
So, identify those individuals, and try to figure out someone they know, who can credibly make an introduction for you. Try and get them to help in advising you or sit on your board and once you can establish credibility perhaps get them to invest. Even if they won’t invest they might know people who will. You can also reach out to venture capital firms for help in identifying angel investors in their market.
The angel investor networks
This category features a group of investors who put aside funds for angel investments. The potential investments that come in are screened by managers who source deals for the investor network. These investors can enjoy their anonymity and still have others doing the due diligence necessary for any potential investments. Moreover, instead of one angel investing the full amount, a group of angels will invest in the deals they prefer individually or collectively. It also makes it easier to raise the full amount when you only need to make one call as opposed to making dozens of calls to individual investors.
If everything else falls apart you might consider hiring a startup fundraising adviser but it will cost you. Advisers work on monthly retainer and will take anywhere from 5% -7% of the money they raise in cash and a matching amount in warrants for a buy-in to the deal. If you can’t raise money from your own sources, this is where you might end up. But be forewarned, advisers are interested in clients who they can easily sell to investors.
Knowing where to go to get funds won’t solve the problem of actually getting them, but at least it will give you an idea of your options as far as getting an angel investor in your corner. These days with the rise in crowdfunding sources, more Angels are getting involved in the early stages of startups as a big part of their investment portfolio.
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