Angel investors can really help a startup hit the high notes, but bagging an angel investment isn’t always as simple as it seems. There are a good many things you need to keep in mind before you take the first steps.
What does an angel investor do? That’s a question you must ask yourself before you start talking to one. Unlike typical lenders, an angel investment is aimed at the person who acts as the brains behind the idea. It’s, in some ways, a marriage of convenience, but it’s not one without consequence.
So what are the things you need to keep in mind?
- You need an iron grip on your idea
Some people go into the angel investment game without realising that they can believe in an idea all they want, but in order for someone else to believe in it, they need to sell it, and they need to sell it superbly well. Your elevator pitch needs to be developed with the K.I.S.S. rule in mind, i.e., keep it simple, stupid. Don’t go overboard and over explain what you’re trying to do. Keep things to the point but bring in hard-core facts and numbers that back up why your idea should get some monetary love. Work with a designer to bring your pitch to life. If you’re on a budget, you can just find templates and use free resources (like the advice we have on EC for founders) to get started.
- Look for mentors
Why would you need to look for mentors before looking for your angel investment? The key here is that angel investors will involve themselves in a business that they think is already working its way toward success. They aren’t going to swoop in to save the day and then nurse your business kinks away. Your sales, marketing, supply chain, etc., will need to be on point so that they find your startup an attractive enough option to get behind. A mentor can help you weed out your issues before you even get to the stage where you’re working on a pitch deck.
- Protect yourself
We cannot stress the importance of patents and intellectual property rights enough. When you’re out and about looking for an angel investment, you are going to be baring your soul to the world to ensure that your hook catches the right fish. But if your idea already hits the airwaves long before you do, then you end up losing everything and gaining nothing. Look into any and all legal protections that can apply to the work that you are doing and make sure they are already out of the way before you start talking about your big idea.
- Will you trade your soul?
At times, people go into the angel investment hunt without having a clear idea of what they are willing to give up, or what they even should. Angel investors come in all shapes and sizes. Some will want equity for a silent partnership; others might take preferred stocks but keep a decision-making role in exchange for their money. You need to know exactly what you are willing to work with before you make the big ask. If you go into a negotiation without knowing what you’re getting into, you may end up with an overbearing angel investor that overrides or hinders your decision-making, for example.
- What kind of funds do you want?
Angel investors, as we said previously, come in all shapes and sizes. There are many different sources from which you can find funding, from family and friends to venture capitalists. Who you choose to go with depends on the needs of your startup and the vision and mission you have for the next five years, or even a decade. Your math needs to be super strong here because you can’t be planning to take over the world with just your mom’s donation to the cause. And you can’t go after a venture capitalist if all you have to offer are small gains.