Has there been a better time to start your own business? Industries are ripe for disruption. Tech companies have slashed payroll. New artificial intelligence tools are hitting the market at next to no cost to you.
But for many aspiring entrepreneurs, a major obstacle remains to bringing an idea to market: Money, of course.
Enter the angel investor.
If you are new to this aspect of the funding game, an angel investor is an individual who provides financial backing for startups and entrepreneurs, typically in exchange for ownership equity in the company.
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If you’re in the early stages of launching your business, an angel investor can provide seed money to take your company or idea to the next level.
“[S]mall businesses in America drive roughly half the national GDP, create 75% of all new jobs and represent 99% of all employers,” says StartupNation CEO Jeff Sloan. “Driving the formation and growth of a significant percentage of new company startups, arguably those that touch our lives most broadly, are the angel and venture funding fueling them.”
Angel investors are often found among an entrepreneur’s family and friends, according to Investopedia: “The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.”
“Prepare to answer questions about all facets of your business. This means developing a thorough understanding of the problem you are solving, talking to potential customers, researching your competition and knowing your key metrics and financials… Listen to constructive criticism, and learn from useful feedback, but always carry a dignified bearing.”
“Before you start sending out messages or asking for introductions, get to know your potential investors . The easiest way? Review the investor’s LinkedIn page, blog and website… And most importantly, make sure you don’t have any direct competitors in their portfolio.”
3. Know Your Outlook
“70% of the decision in early stage investing is betting on the driver. [If] I don’t have the right driver, I don’t win races. So we’re betting on a driver. We ask ourselves the question: can we believe that this guy can drive? He or she, can they drive the company? If we don’t think they’re drivers – they don’t have driver personalities – we are not going to invest. I don’t want to have a parking lot full of cars.”
Facebook and Home Depot were started in a garage and grew to become the behemoths they are today after getting a start with angel investing.
Angel investors provide up to 90% of outside funding for startups, which equates to $25 billion to 70,000 companies annually.
Angels are called angels because their capital tends to be more patient and more valuable than just the value of the dollar they put into the company, Sloan says.
Need funding? Remember these three tips.