If you are planning to be an entrepreneur, I am sure you have come across ‘angel investors’ many a time.
Apart from startups, this is one of the most commonly used terms in the world of entrepreneurship.
Well, these angel investors don’t come with a halo or a pair of wings.
But the fact is they can surely give wing to your business venture.
Usually these type of angel investors put their money in the early stage of business.
The reason they are referred to as angel investors is because they are like angels helping you take forward your business.
The capital that they provide may sometimes become part of the seed money you start with business with.
You do not need any special qualification to be an angel investor.
All you need is adequate capital and a willingness to invest in your business.
So, technically angel investors can even be someone from your family or friend circle.
So why is there a special term to refer to them?
In terms of pure functionality, they appear similar to lenders.
They have a minimum role in the business operation and get a share of business as return on investment.
But the reason why you may still prefer them is the condition of repayment.
Typically, they invest on the basis of their terms with the investor.
The focus here is on getting the business started.
The viability and profitability of the business model are not the primary objective.
This is where they are very different from the venture capitalist.
They are very informal in comparison to venture capitalist.
Most times, their investment model is based on the level of the investor’s confidence.
That becomes the crucial deciding factor.
How Did the Term Angel Investors Originate?
But the question is why call them angel investors?
Well, there is a variety of explanation for it.
William Wetzel of the University of New Hampshire was one of the first persons to use this term
He was the founder of the Center for Venture Research and undertook the study on how entrepreneurs gathered funds.
In fact, you can trace the origin of the term to Broadway.
As fund crunched directors struggled to get funding for their works, many affluent gentlemen helped them out.
They provided money to fund these theatrical productions.
Once the theater started yielding revenue, they were paid back in full with interest.
Wetzel in 1978 went ahead with his work and termed these investors as angel investors.
So he grouped them as investors who supported new businesses and provided seed capital.
The angel investors, in many ways, were the guardian angels for these businesses.
They helped the business thrive and grow at a gradual pace.
But business dynamics have come a long way from Broadway Theatres.
Today Silicon Valley is thriving with an unending line of budding entrepreneurs.
They all have unique ideas and lots of enthusiasm.
But often it is these angel investors who help give wing to their business.
But unlike Venture Capitalists, just the extent of return on investment is not their only motivation.
They do not invest in the business because they expect exemplary returns.
Often the enthusiasm and perseverance of investors motivate them the most.
That in many ways becomes a greater and more important factor that drives their investment calls.
The angel investors, as a result, do not follow any set norms for investment.
There is no reason if 5 angel investors are not convinced by your plan, the sixth one would not either.
Source of Funding for Angel Investors
Angel investment is a key source of funding in the entrepreneurial world today.
If you check the fund flow in the last decade, Silicon Valley received over $22 billion through angel investors.
That comprises almost 40% of the total entrepreneurial funding.
That means angel investors are helping address financial requirements in the startup world in a big way.
They are almost one of the most active group of investors.
That makes them also one of the primary drivers of new business.
This is a very important element in the overall entrepreneurial culture.
But does that mean you have to be a millionaire to be an angel investor.
Well, quite unlike popular belief, this is never the case.
You don’t have to be sitting on a huge mound of money to invest in a business.
In fact, if you see some recent studies, many angel investors are regular professionals.
You can be anybody, a lawyer, doctor or just about anybody with a regular source of money.
In some instances, angel investors may invest as little as $25000 to $30000.
In most times, it is about finding the right fit as per the demands of the business.
It is not even surprising to see retired professionals parting with a chunk of their money.
The funding amount can be sometimes as high as $100000 or even more.
You may even have a group of angel investors coming together to fund a specific business.
Needless to mention, the ease of connecting with angel investors also helped a lot.
This has drastically boosted access to them in a meaningful way.
It has made them more approachable and enabled entrepreneurs to look for them a lot easily.
It has kindled the possibility of getting funds a lot easier than through banks.
SEC Norms for Angel Investors
Though your willingness and access to funds is sufficient for you to be angel investors, you have to adhere to some norms.
The US SEC or the Securities Exchange Commission have outlined some essential requirements.
These guidelines are useful for both the investors and the entrepreneurs.
These ensure that there is a distinct amount of accountability in terms of taking money.
Neither can professionals use this medium to get rid of their illegal funds nor can entrepreneurs hoodwink gullible investors.
The US SEC has some strict measures for who can be accredited investors.
They need to have an annual income of $200000 and a minimum $1 million net worth.
That is what essentially makes these investors accredited.
This accreditation gives them the right to deal with securities that are not registered with financial bodies.
Apart from income and net worth, there are other means of winning accreditation as well.
You can have a professional qualification to win the accreditation.
Alternatively, your governance status may also give you the right to invest.
This essentially means that these investors are more financially savvy than the rest.
They also need a much lesser degree of protection and handholding.
That makes them relatively more self-sufficient investors with a greater degree of reliability.
Often businesses turn to these accredited investors or angel investors for low-cost funds.
Raising capital can be a somewhat costly affair.
In this context, businesses find it a lot easier to contact accredited angel investors.
Regulatory authorities will then verify the credentials of the angel investors.
These investors should be well equipped in terms of financial dealings.
In the sense, they must be capable enough to gauge the risks involved in a financial investment.
So a result, they will be able to calibrate the risk too.
How to Connect with Angel Investors?
But even understanding of the SEC accreditation does not sort out the availability issue.
I may have a great business plan and a niche idea.
But that is not always sufficient to land with the right set of investors.
You may have to deal with many rejections before you are accepted.
You may have to tweak your presentation as you keep addressing a fresh set of investors.
There are times when you may approach an angel investor in a very unconventional fashion.
But the fact is that the internet has surely eased the access to angel investors.
It has become much easier to contact them over an extended period.
Moreover, the internet has also expanded the reach of angel investors.
They are no longer limited by their geographical boundaries.
You can be in the United States and still manage to fund operation in Vietnam.
Provided the due diligence is undertaken properly.
Of course, this has meant that even for entrepreneurs, it is much easier to look for entrepreneurs.
They can approach potential angel investors through a wide range of options online.
There are associations online and entrepreneurs can even choose to contact the angel investors directly.
There are many web conferences and webinars.
Interested entrepreneurs can easily participate in these and look for potential investors.
Moreover, the internet also facilitates easy access to a wide network of angel investors.
That means you are not connecting with just one but a whole group of such investors.
That surely improves the chance of accessing funds a lot easier.
It also improves the potential of getting an investor easily.
The angel investors also find the online set-up way simpler to look for potential targets.
This surely enhances the quality of funds and probability of good businesses thriving.
1. Contacting Angel Investors
Therefore contacting appropriate angel investors is often the biggest challenge.
One of the most common sources is undeniably rich individuals with enthusiasm for new projects.
You can approach them with the business plan and then take things forward based on the response.
The other easy alternative is undeniably the angel investors’ syndicate.
These syndicates work like Chambers of Commerce and are extremely well networked.
That will mean that you can easily approach these syndicates for potential investors or contact others through their network.
Referrals are also an easy way to look for them.
Most importantly there aren’t different investors for different fund limits.
The best thing is there is no upper or lower limit; you can approach them for any amount of investment.
Sometimes angel investors may themselves look for potential targets.
They can appoint professionals too in helping them zero on targets.
Given all these factors, the online network comes in very handy.
It undeniably improves the opportunity and ability to contact angel investors a lot faster.
Whether you approach them individually or through a syndicate, it is way simpler for them.
Crowdfunding is another common source of getting angel investment.
The fact that you can invest as little as $1000 through it further makes them viable.
But here too internet networking plays a crucial role.
If you just type in angel investment online, a plethora of options will open up.
But looking for the online is often as tricky as offline.
Don’t just look for the money you are getting.
You also need to pay careful attention to the kind of managerial role they are looking.
Angel investors and business opportunities are practically lurking in every corner of the virtual world.
But making a wise choice is very important for properly initiating a thriving business.
2. Thorough Research Is Important
That means when you are looking for angel investors online, thorough research is crucial.
Often that is one of the biggest differences between a successful business and a mere concept.
The digital empowerment has undeniably created better opportunities.
But at the same time, it has also increased the possibility of foul play.
Only thorough research offers a fairly dependable solution that can yield a long-term profit.
The Internet has now enhanced the reach and degree of assistance that angel investors can offer.
That is why you have to be very careful about the type of choice you make.
There are many websites that are created potentially to reach target businesses.
Entrepreneurs can approach these sites online and apply for funds.
They can share their plans and strategies in a constructive manner online.
Some websites are even geared properly to submit plans or organize meet-ups.
In some cases, even when angel investors may not accept your plan, they can forward it to relevant investors.
So the online association helps entrepreneurs in reaching a larger network of entrepreneurs.
You should look for possible syndicates online as well.
The online syndicates are more effective in getting you the right opportunity a lot faster.
This is because the internet is not restrained by geographical limitations or time issues.
Here businesses can happen at any time of the day and any possible hours.
So the internet does not just broaden opportunities, it speeds up the funding process to.
That is another major advantage of looking for angel investors online.
You end up losing a lot less time than otherwise.
Therefore, on the whole, it facilitates better opportunities a lot faster.
That is one of the key reasons why entrepreneurs are looking for angel investors online.
However, caution at every stage is crucial.
3. Identify the Proper Groups
However, there is one basic problem with the online search.
There is no guarantee that you will get in touch with the right group at the first chance.
The question then is how do you ensure that your search is on the right track?
The best way is to branch out your online research.
It is not just sufficient to look for angel investors online.
The chances are you will take a long time to identify the right ones.
Most active angel investors maintain a very low profile.
This is exactly where the angel investor groups or syndicates become so important.
They are often the most important link in the entire jigsaw puzzle.
They help direct your search in the right direction.
So try to identify these groups and networks at the earliest.
Try and maintain one on one contact with as many as possible.
This will ensure that you are preferably on top of the investor’s list as well.
This will also improve the chances of more investors approaching you.
Being in touch with these groups will also mean that your visibility improves.
You are not just a potential target for a set of few investors in the United States.
People from all over the world can look at funding your business.
So that means the opportunity to make individual pitches also increase.
That is what creates a much better prospect of getting funding faster.
Moreover, these groups also give you a better sense of credibility and genuineness.
You can avoid individual traps looking to steal your business ideas.
The angel investors can help put your business plan on the fast track.
But looking for them online ain’t that simple.
You have to undertake in-depth research and focused study to look for angel investors.
They maintain a rather low profile, and that is why the online syndicates can be very helpful.
But remember to verify the authenticity and credibility of the angel investors you choose.
The SEC accredited investors are undeniably the most genuine angel investors to go ahead with.