If you’re a startup looking for business funding, you’ve likely looked into some type of venture source funding. As a startup, angel investors are the most likely source of funding for your business, because they are the largest funding source for startups.
Before you start looking and reaching out to potential investors, you must understand the critical elements of your pitch and how to attract angel investors. You must first understand who they are, why and how they invest in startups, and what they’re looking for. Once you understand this information, you can focus your efforts on connecting with angel investors who are the best fit for your business and would most likely be interested in investing in your startup.
Information you need to know on how to attract angel investors:
1. What type of commitment are they looking for?
Most angel investors are current or former entrepreneurs who have an interest in contributing to the success of a great business from the very beginning. Some investors like to play an active role in the business, in which they can share their expertise and work closely with the team to grow the business. Others prefer to focus only on their financial investment by taking more of a hands-off approach. They will still want to receive consistent communications regarding business growth, status updates, and projections. It’s important for you to understand what type of investor would work best for you and your business, then you can make sure to look for the best angel investor to meet your business’ needs.
2. What type of investment are they looking for?
While angels may invest individually for a smaller investment amount, you may have a group of angels who invest over $1 million. As per TechCrunch, the average investment for the first half of 2016 was $1.14 million, and continues to rise. If you’re looking for a much larger investment, it may be best to look for other venture capital funding options, which are more likely to fund larger investment amounts.
3. What type of business plan and metrics are they looking for?
Angel investors want to see a clear business plan and revenue projections that are credible.
This information needs to include a clearly written business model, marketing plan, and exit strategy. Angles are investing in a business they believe will grow and provide a sizeable return on their investment. To clearly demonstrate this, you need to clearly outline your revenue projections and make sure to include the 6 marketing metrics your investors care about.
Now that you have a basic understanding of what angel investors are looking for, outline a plan to gather the information you need and make sure to download and complete the 6 Marketing Metrics Your Investors Care About. After you’ve put together all this information, take a look at some angel investor sites, such as Alliance of Angels, Gust, and AngelList to help you connect with angel investors.