Have you heard that you need to spend money to make money? It’s an oft-repeated sentiment, but it’s that “spend money” part where a lot of businesses get stuck.
When you’re just getting your business idea off the ground and are pinching every last penny, accessing the capital you need to gain momentum can be a major and frustrating roadblock. Even more disheartening? Several of the most common reasons for small business failure come back to the lack of cold, hard cash.
That’s where angel investors come (or should we say fly?) in.
Let’s start with a simple angel investors definition: An angel investor is someone who provides capital to an entrepreneur or small business in its very early stages. We mean very early—sometimes the business is nothing more than an idea or a prototype. In exchange for financial backing, angel investors usually take equity in the company.
Why are these investors called angels? Well, because they often act as a saving grace for a startup. Since angel investors are offering money at such an early stage, it’s considered a riskier investment. For that reason, angel funding is frequently one of the only options for new businesses struggling to access other, more traditional types of funding.
There’s quite a bit of overlap between angel investors and venture capitalists. They’re both investing money into a business in the hopes of getting a return.
However, there are some notable differences between these 2 types of investors, including:
See? There’s a distinction between these investors. However, both angel investors and VCs generally provide strategic advice, support, and expertise to the startups they invest in, along with financing. After all, any type of investor ultimately wants the business to be successful.
Now that you know the basics, let’s get to the good stuff—how do you find angel investors?
If you’re like most people, you don’t have a huge web of connections who are willing to throw thousands or even hundreds of thousands of dollars at your startup—and that can make finding angel investors a challenge.
The good news is that there are some steps you can take to find funding for your brand new business (or even your business idea).
As with any investment, it’s important you understand what you need. That will provide a lot of direction before you start pounding the pavement looking for money.
Do you need $10,000 to get your business going? Or do you need $1 million? Are you hoping to get what you need from a single angel investor? Or are you willing to open things up to many different investors?
Answers to questions like those will not only help guide you as you start your search for investors but also make you look polished and confident—even if your business is brand new.
While many businesses discern between angel investors and a “friends and family round,” there’s quite a bit in common. In fact, many angel investors fund businesses of their friends and family.
So when you start your search for business investments, it can be best to begin in your backyard. Your loved ones likely won’t be investors who are accredited by the Securities and Exchange Commission (SEC), but they can still help get your business going.
In fact, friends and family are a huge source of investment for startups, investing a combined $60 billion per year. In comparison, angel investors invest $20 billion in a year.
When approaching friends and family for money for your small business, make sure you:
Of course, it’s entirely possible the people in your immediate circle don’t have the means to invest in your business, even if they believe in you. Regardless of if they open their wallets, remember to appreciate their other methods of support and encouragement—those are important too.
Perhaps you don’t know somebody who’s prepared to invest in your business. But your friend might. Or your neighbor. Or your uncle. You get the idea.
We’ll spare you the clichés about the importance of your network, but this web of contacts is particularly important when you’re looking for investments.
Your best place to start is to connect with other small business owners in your area. The small business community is…well, small. They might have some insight into angel investors who are looking for new opportunities.
Additionally, it can be helpful to find a mentor through SCORE, a nonprofit organization and partner of the US Small Business Administration (SBA). These mentors are established and experienced business professionals who have access to hard-won information and resources—which might include an “in” with an angel investor.
Thanks to the internet, we have piles of information right at our fingertips. There are a number of platforms designed to help entrepreneurs find angel investors without even leaving their couch.
Some of the best options to check out include:
LinkedIn can also be helpful. Use the search functionality to search “angel investor” and then click the top menu option for “people.” From there, you can apply additional filters to narrow down by location, company, school, or even your degree of connection.
Many businesses look to angel investors to get the financial backing they need at an early stage, and these types of investments certainly have their merits.
While the little voice in your head might be telling you that you’ll never qualify for a loan, that’s not necessarily the truth. With Lendio, you can fill out a simple application (we promise, it takes 15 minutes), compare your lending options, and get your capital in less than 24 hours.
That quick application could be all that stands between you and the funding you need—and you won’t even have to part with equity or beg your loved ones for money to get it.