Angel Funding is done by angel investors (may be solo or in the group). They are quite famous especially amongst startups, they are simply those who invest in a particular company based on various factors. They can be formal or informal, they may be partners or they may be entrepreneurs themselves. Anyhow they are people loaded with money or that’s a general perception about them. It’s a known fact that getting investors for your company especially for a startup is a pretty difficult job even though there are lots and lots of investors present in the market today. Raising funds are important especially when you have almost no capital for your business. Angel funding plays an important role because they are one on one and indulges profit of both the sides. This funding is nowadays mostly accounted legally. Described below is how angel investors work and how you can raise some angel funding for your startup.
It’s pretty difficult to depend on banks and similar institutions to lend money for startups, not only the procedure is long and tiring you also need to provide assets as security, which is generally next to impossible when it comes to startups, here comes angel investors, if once convinced they can invest money without any security in terms of assets but they want security in terms of good strategies and promised profits.
Who are Business Angels?
Business angels range from silent investors who sit back and wait patiently for results, to others who want to be involved in the operations of the company, as a part-time consultant or as a full-time partner.
Business angels can be classified in the following categories:
- Entrepreneurial angels are those who have their own business but are looking up for investing in other firms. They are generally preferred since they are experienced and have a fair idea on how the market works.
- Corporate angels are the one who is linked to the corporate world that is they have established themselves in multinational companies and now are simply looking for some investments.
- Professional angels are the one with professional jobs(doctor, lawyers, professors) who invest their savings and are generally silent investors.
- Enthusiast angels are the one who is retired entrepreneurs or executive who invest in startups as a hobby.
- Micromanagement angels are the one who has already well established their companies and are now looking for startups which they can run or have a direct say in. They are quite active and sometimes are present as board members.
Where does they Invest?
They invest generally in exchange for equity ownership interests. The angel investors deal particularly on basis of attitude, quality, commitment, and passion of the entrepreneurs, they care about the potential of the startup in the market, a strategically strong business plan and interests of the customers. Sometimes they also invest seeing the motto and the beliefs of a particular startup under the name of humanity.
Expectations of Angel Investors
Angel Investors do expect certain things from a particular start-up ranging from fame to productivity. In initial few months, they keep close tabs on the profits and bank statements, also the customers and marketing. They even act as part-time consultants to establish a start-up firmly in the market.
To meet all these expectations is quite difficult for an entrepreneur especially when he is involved in a start-up and hence it’s quite difficult to find angel investors. In order to raise funds you need to look in the right place and the right way. There is no ideal type of business angel. Just as a wise angel carefully investigate the entrepreneur before investing, likewise smart entrepreneur should find out as much as possible about a potential business angel.
General Points regarding Angel Funding
- You need to make sure that the investors you look for should be interested in the field you are starting up your business. or happens to be in the same sector.
- You should give them a true prospectus on what you aim to achieve and how are you going to achieve it. Be your true self.
- You should be clear when it comes to your beliefs and should have clear idea on how you are planning to use the money invested by the angel investors.
- To avoid any legal issues, a legal document stating terms and conditions of the both the sides should be established.
- You should know how to make negotiations and should prepare yourself to go through certain meetings and expect failure.
- Look up for investors online. Portals like AngelList can help you.
- Make attractive offers and ask for reasonable funds. Do not appear like a clingy girlfriend or they will throw you out even before you can say angel funding.
- You can simply take legal advice.
A properly planned out portfolio will make you stand out. Look up for start-ups similar to you and find out about the angel investors who helped them, this may get you some of your own angel investors. Also, you should start making strategies for marketing so that you gain attraction. The attraction will not only give you more customers but will also attract investors towards you. It’s quite simple that angel investors look for a promising startup and in order to look promising you need attention as much as possible. Set up your marketing team and get to work!