Suppose you have an idea that you think could change the world, and bring you and your partners a lot of money at the same time. So you start a company based around that idea and develop your product further. But after some time you realize that as much as the company is yours and you are willing to work on it till the world’s end, you alone don’t have the resources to give a proper physical form to your idea. So instead of feeling dejected and giving up, you bring in a person who has the resources to bail you out of your fix. This person is called an Angel Investor.
The first round of raising capital that helps you build up your company from scratch and bring it into the real world is called the Angel round of investment. And as the name suggests, an Angel Investor is someone who invests in you in this Angel round.
The reason why the term ‘Angel’ is used instead of something like ‘the first investor’ is that most venture capitalists are reluctant in investing in companies during their baby stages. At the initial stages of a startup, most companies don’t have much momentum and their direction keeps on changing, and that’s something big venture capitalists don’t look forward to. An Angel Investor puts out seed money usually in return for ownership equity or sometimes convertible debt.
These types of investments are risky as the chances of a startup failing is high, that’s why most angel investors are wealthy individuals who are looking for a higher and quicker return rate for their money.
The above all is just information on what Angel Investors are and what do they do, which you can easily look up online. But the primary focus of a startup that is looking for their first round of investment should be to get to know the networks of Angel Investors and get the right type of Angel for them.
How To Identify A Good Angel Investor?
Since there are no hard and fast rules for being an investor, (no degree is required to become an investor!) you should focus on the profile of a person to determine whether he/she is a good Angel Investor or not.
Typically an Angel Investor is a middle-aged person (40 to 60 years of age) who has a net worth of more than 1 million USD. They are known for investing in small start-ups and companies and have the capability to invest more than 50k USD in a business. Mostly Angel Investors are businessmen themselves and have multiple businesses set up throughout their industry, giving them enough experience to guide you and their investment in the right direction. The typical involvement of an Angel Investor in a startup lasts for 5 to 6 years, although some might be looking at a much faster return from a cash cow business.
As said earlier, the above qualities need not be taken as absolute rules that need to be followed, but more as helpful, probable guidelines. Traditional investing methods are going down, and with it, the number of traditional investors is going down too.
Where To Find An Angel Investor?
Well, as everything in the slowly moving modernized world, there are two ways to find an Angel Investor:
The Traditional Way
The Modern Way
The Traditional Way
Many businessmen, small and large, are Angel Investors themselves. So taking part in your local business communities would be a good way to find out what type of Angel Investors are available in your area. Most Angel Investors want to invest in a local business as it gives them a more hands-on approach, and this is better for your startup too as your investor is within hands reach if a disaster occurs or you need strategic advice.
Attending business fairs and trading events would help you network a lot too as most Investors are present at such meetings. It is very important to get you and your company’s face out there as surprisingly investors are only willing to give away their money to companies that hustle to go big. Step out, make connections, and build up your network. An Angel Investor looks for a dynamic company that can make him/her money, instead of a company that just takes his/her capital and flies with it.
The Modern Way
It should be of no surprise that in 2020, in the age of smartphones, where you can find anything and anyone online, you can find Angel Investors online too.
Angel Investors can be reached out solo on business platforms like LinkedIn as well, but contacting them on websites made specifically for angel investing is easier and more reliable as most Angel Investors like to work around their own network.
Some of the websites that have worked well for other start-ups in the past are:
● NEXA
These online platforms offer a quick way to build up your investment network and get the right type of Angel Investor for your startup. Although traditional ways and modern ways bring the same end result, each has its own pros and cons. Traditional ways of bringing in Angel Investors help you build up a more organic network that is comparatively stronger than an online network, while the modern ways bring you far more reach than your local business community can ever give you. In the end, it all depends on you and which route you want to take to get an Angel investment to propel your company forward.
Who Is Jerry Mononela?
Jerry Mononela is a businessman cum Angel Investor in South Africa, and has an insatiable thirst for the stock market. I advise people on investments and educated novices about finances so that they can guide their money better in this cut-throat environment. I also write articles on finance and investment tips.
If you liked this article on Jerry Mononela, check out more of me on my blog and Reddit.