Ten Tips For Finding And Working With Angel Investors

Discover how to find angel investors and make an impact once you do meet with them. There are critical steps you need to take to be prepared, find out what they are.

Angel InvestorsIf you are starting a business or growing an existing business, you are likely to find yourself in a situation where you need capital. Unfortunately, the majority of small business owners these days don't qualify for traditional bank financing. Instead they are seeking alternative sources of capital, such as an Angel Investor or Angel Group.

Most entrepreneurs when presented with the option of working with Angel Investors respond negatively. They don't know how to find angel investors or how to approach them. So here are ten tips for finding and working with angel investors collected from my years of experience working with angels and investing in deals myself.

1. Network, network, network. Build your network and you'll build your net worth. You don't have to know an angel investor to get a meeting with one; you just need someone in your network that can connect you to an angel investor.

2. Have a Business Plan. Once an angel investor says they are interested in learning more they will want a business plan. The business plan should have all key areas mapped out such as a clear explanation of the product/service, the size of the market, the target demographic, return on investment for the investor, exit strategy, financials, pro forma, and organizational structure of the company.

3. Investors invest in people not the idea. Don't pretend to be someone you're not in order to solicit an investor. Investors want to work with people they like, they trust, and they believe can grow the business. If you pretend to be someone you're not, the investor will find out over time and the deal will likely blow up.

4. Have your elevator pitch down. You never know when you will have the opportunity to get an investor interested in your deal. You could run into an investor who wants to hear about your deal at a cocktail party, walking down the street, by email, over the phone, in a meeting or just about any way you didn't think would have been the traditional introduction. So be prepared to present a killer elevator pitch that clearly states your offer, your business, and what makes you and your company unique.

5. Put together a one-two page summary. In addition to the elevator pitch you need to have a one to two page executive summary on your business, similar to the elevator pitch, but on paper. This is something you can hand to an investor if they want to learn more without boring them with a 30-page business plan.

6. Know your numbers. Angel investors don't want to invest in a business when the owner can't articulate what the numbers in the business plan mean. The fastest way to lose confidence in an investor is when you can't explain the numbers.

7. Learn basic presentation skills. Investors want to have confidence in their investment. You are their investment. If you have trouble speaking in front of people, you need to learn the skill. You don't need to be the next Tony Robbins, but you do need to be able to provide a clear and interesting presentation that will attract the interest of those listening.

8. Know your strengths. Investors know that you aren't going to be an expert at all aspects of running a business. They want to know the truth about what strengths you have and more importantly what you believe are your weaknesses. Then you need to explain how you are going to overcome those weaknesses by outsourcing, hiring experts, or another way.

9. Have a team. A team is important for investors to see. They need to know you understand a business isn't built with just one person. You don't have to have specific individuals in place right away and they don't have to be employees. They can be mentors, board of advisors, board of directors, managers or independent contractors. At minimum have an organizational chart based on a time line for growing the business and what team members you will add over time.

10. Maintain Focus. The last thing investors want is to invest in a business only to have the entrepreneur get sidetracked with other ideas. They also want to see focus when you are presenting your deal to them. Don't have too many projects, product lines or ideas. Maintain focus on what you are offering and investors will find clarity in your offer. Clarity = Power.

These tips can be very helpful but if no action is taken to implement them, you'll remain in the same position you are today—little to no chance of getting funded by an Angel Investor. So take the steps to put yourself in a position to get funded:

Step #1—Develop your elevator pitch and one page presentation.
Step #2—Write out your business plan.
Step #3—Join networking groups and attend conferences where investors are likely to be.

Read more about Getting Funded

David Gass is an Entrepreneur, Angel Investor, and Buying and Selling Website Expert. He founded Business Credit Services in October of 2000 and sold the company in 2008 to The Company Corporation. Mr. Gass is a sought after national speaker on the subjects of small business financing, business credit, and buying and selling websites.

 

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33 Comments

  • Geraldine Williams

    This is a great article for a beginner.  Very informative.  My greatest task now is developing a Business Plan.  I plan to use BSCS.

  • oratai culhane

    I am starting the new business without any funds of my own. This article is really helpful for me. I heard about Angel Investors before but didn't know how to find or approach them. After reading this 10 tips, I think I know how to prepared and ready to find them. Thank you very much for your information. 

  • M.R. Turnbull

    The article was once again a wealth of knowledge for veterans and newcomers of business. Angel Investors are a anonymous group and knowing how to locate and approach them makes getting funded a lot less daunting task. By providing these 10 tips and applying them, it'll make any businessperson get that resurgence of knowing that their business can become the next global phenomenon despite what anyone says to them. As long as they put up the dream, put in the knowledge and put in the effort, how can they fail. Thank again D.C. you're always on point!!  

  • Mark White

    Anyone that is starting or building a business needs to know a bit of everything and every aspect of the company.  Do not fall into the trap of hiring someone to create your business plan, set up your business accounts with the banks, State of Fed's and just assume they know what they are doing.  Have a good idea of what needs to be done, take your time and research, especially when it comes to your business plan.  You do not have to know everything, but you will be asked about the information presented… Be prepared to know what is in your plan and why it’s there.  There are places on the web such as SCORE that will help you and provide you with feedback on every aspect of your business. 
     
    Since I started our company back in 2007, we planned on opening a Restaurant. I spent 10 months learning and building my business plan with an investor at my side.  When I finished, I had a $600,000 loan from the USDA and our local bank.  The business plan was “Very impressive and prefect” according to the Banker.  I did not have to have a plan in front of me to answer a single question.  The investor was impressed because all he had to do was SHOW a liquid asset of $140,000.  This was not even going to be touched since we had the full amount requested. The day I went to sign the papers at the bank, I got a call from the investor saying that he could not show the assets and I lost the loan. 
     
    The point of this story is to let you know that you need to keep your eyes open, check on the investors as much as they will check on you.  Have a back-up plan or back-up investor ready to go at a moments notice.  All of the information in this article was information I learned from others such as Mr. David Gass, these people are an extreme asset you will need to learn from.  Know the ten things above, but also know your investors and what they can do to help you.  Do they have a track record?  Do they have people that can help you get established such as an experienced manager?  Some investors will want one of their team in place for a short time to make sure things are running smooth.  Be prepared for things like this when you talk with them, ask them questions as well, after all, it’s your business and name on the line.
     
    I hope this helps a bit.
    Mark White  

  • Beverly Van Lieshout

    This is an excellent article and it hits right on target.   So many of the people I have talked to about funding ask the exact questions being asked here.  And so many of us can not answer them right then and there.  As a result we leave a poor impression and the person just does not want to waste any more time with us. We may really be on to something but we sure do not tell them so they can understand it.  And not understanding it turns them away and us without the funding we were looking for.

  • robert swenson

    Definitely hit the mark, short concise and to the point. For someone i the middle of building a business plan and seeking funding for startup capital. The article was riht on time and right on the money.

  • monte

    Sober and precise article. Thank you for not evangilizing on the psychology of persuading investors. The article actually spoke to more healthy approaches to dealing with investors (,,,and people in general).

    Two specific points resonated with me the most. First - be yourself. Excellent advice. In this age of e-profiling, old school "unto thy own self be true" is still the most sober advice you can provide. Second, the suggestion that you do not absolutely need to be completely staffed in the start-up phase, and that it may be advantageous to tap mentors, colleagues and other subject matter experts in your network to provide functional expertise during the bootstrapping stage. Great points that I will definetly consider going forward. Much Appreciated.

  • Jaime Rocha

    You hit on the the basic and essential points to courting investors. I
    think a key concepts are 8 and 9.  Investors want to know their
    investment is riding alone on the back of one person.  It is also
    important to surround yourself with people who have strengths in your
    weak spots.  That takes a very confident, secure person.  Thanks for
    your thoughts.  I'm going to share it on my Twitter account @DoubleRock2011:twitter

  • Jaime Rocha

    You hit on the the basic and essential points to courting investors. I think a key concepts are 8 and 9.  Investors want to know their investment is riding alone on the back of one person.  It is also important to surround yourself with people who have strengths in your weak spots.  That takes a very confident, secure person.  Thanks for your thoughts.

  • Michael Charles

    Thank you for this no frills report on what needs to be done. For someone who has never done a task like this, the step-by-step presentation is extremely helpful. In short, now that you have outlined what needs to be done, lets roll up our sleeves and get going. Thank you for sharing this basic yet critical insight.

  • Joey Samonte

    This outline presents such great clarity.  I first thought of this as textbook. Then after reading about the author, I felt more comfortable knowing that every minute I have spent digesting this article was well spent.  I truly believe that if every small business would be supported this way and provided the right opportunity, this may be the answer to our challenged economy.  Thank you.

  • Karen Bishop

    The article makes great sense...I think what you are saying is to keep focused....I have a business idea and am brainstorming ways to find funding. So, reading this tells me to see my plans the way an angel investor would...in other words, put my plan outside of myself and really take a look at it. Lastly, integrity is essential to a good business plan. No angel investor will fund my idea if it does not have integrity. 

  • Stan Douglas

    Great tips! Just returned from an Angel Investor meeting where the director of the group informed the entrepreneurs in the audience that it generally takes 75 or so presentations to get funded. He was just setting expectations; it's a long slog.

  • Bob Abney

    Despite having an MBA from Sacred Heart University, I had no idea how naive I was about starting a business when I began to market my patent pending, paradigm changing toilet bowl cleaning system.  Strapped for funds, my first challenge was finding a patent lawyer that would accept equity.  After finding him, then I needed an industrial designer that could transform my rudimentary drawings into a presentable design,,,also for an equity stake.  I was ecstatic with his depictions but was totally overwhelmed when he produced an advanced working prototype that is currently being evaluated for production costs in China.  It was as if Providence was smiling upon us.  As I began my search for investors, your article precisely outlines the unique education that I experienced.  Unfortunately, I may have turned off some potential investors with my naïveté during this process.
     
    Realizing that I had never even seen a business plan and unhappy with the online formats that I had found, I began my search for a professional that I could collaborate with.  Again, the stars aligned when I found a former CFO of pre-IPO Bare Essentuals who was operating a consultancy.  The finished product was a 32 page work of art (IMHO) and an Excel workbook of financials.  I was assured that our numbers were very good and I recommenced my networking online and on the phones.  I enjoyed more positive results but the business plan proved to be too cumbersome for most investors and I was asked for a two page executive summary.  Luckily, my consultant was able to provide one very quickly.  All the while my elevator pitch had become almost second nature.
     
    During my continued search for that elusive investor, I encountered a company that had developed an effervescent toilet bowl cleaning tablet that they readily admitted would not perform well without something like my device.  We came up with the strategy to combine our products, which had the added benefit of creating a recurring market for us and our potential investor.  We currently have two serious interested parties but they have yet to pull the trigger other than send the prototype to China for evaluation.  Nonetheless, I’m still entertaining potential deals.
     
    All in all, my experience validates every point in your article, which should be very valuable for budding entrepreneurs.  I wish that I had that article a couple of years back and the wisdom to recognize it for the road map for success it is…IF you’ve just built that “better mousetrap.”  The world’s supposed to beat a pathway to your door.
     
    rbabney@aol.com

  • Donald R. Thomas

    Excellent article on what we should be doing in business daily if we are looking for an investor or not.  Just doing these simple steps will help us perform, measure and grow our business.  Thank you.

  • Buzzard777

    Common sense is uncommon.  This article informed me of points I should have known.  I found myself saying, "Oh yeah!" that makes sense.  "Oh yeah!" I should have known that.  "Oh yeah!",  put myself in the Angel Investor's shoes.  Was it a good article? - - - "Oh yeah!"  Now I just need to follow the steps and do MY job to attract an Angel Investor - - -"Oh yeah!"  Thanks!

  • Wanda

    I would like to thank you for the tips, I have never though about using a investor to help with the growth of my business,and I see now that if I decide to do so this would be great info for me. I really feel that tip 10 is the best one for me. Maintain Focus, Maintaining focus is the key to the business,moving to new levels. I would love to read your book and learn more tips to help me to be a better business person. I do have a few of these tips in place. Good Info

    Thank You

    Wanda 

  • Peter Russell

    Excellent traditional advice which illustrates the self discipline and unflagging effort required to bring a project to fruition.  Your new book appears to offer some tantalizing, less trodden paths towards securing capital on acceptable terms, and one wonders if royalty agreements get mentioned. 

  • Tony Hale

    I enjoyed the article.  I will apply the tips and steps to all my projects.  I may have to change up the delivery a bit because culture plays a large role in doing business in Native America.  Whenever you do business on or with an American Indian Nation please be alert of the cultural do's and don'ts.  Thanks again for your article David. 

    Always walk in beauty