“Who exactly are Angle Investors?”
Professionals such as entrepreneurs, businesses, lawyers, doctors, and so on…can all be, so called, “Angel Investors”, with a will to invest in from few hundreds to thousands of dollars in funding a startup for expecting good returns once the startup goes successful.
How the process works?
The angel investors or simply put “Angels”, approaches Securities Exchange Board/Commission, already comprising of experienced and reputed investors.
These angels need to show a net worth of minimum $1 million and in addition should be earning $2,00,000 a year being single, and $3,00,000 a year with spouse.
The angels lend money to budding entrepreneurs or businesses who are seeking good enough funding for their business. In return, the startups allot company’s equity to these angels for future revenue or profit sharing when business gets successful.
The advantages
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Ideal for businesses who have gone one-step beyond the startup phase with an established business marketing strategy in place and ready with some initial revenue to incur preliminary costs.
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Many startups already have some investment in store. What really they require is a thrust to push themselves on the next level with some extra cash. They not just need funding but also mentoring as well as guidance wherein angels come into play to provide top-level motivation for startups to succeed.
The disadvantages
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Giving away almost 10-50% business share is always riskier considering the fact that your own job could be at stake if the investors fill that you are not fit for the job.
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Angel investors are quite similar to venture capitalists who ultimately see their own profit at the end of the day. If they feel that you are the biggest obstacle or dead end blocking your own ambitious idea then you might have to lose your own created game.
How to convince the angel investors?
Angel investors are highly learned people with either top educated professionals, wealthy people with a strong business knowhow, or even veteran entrepreneurs.
Hence, first impressions do matter a lot when trying to convince these people. When pitching presentation to angel investors or venture capitalists, it is important to understand that they have certain expectations with what you are about to deliver.
Whether pitching out first time or already an experienced person, the basics remain the same for both. There are 3 essentials or 3 tips startups should strictly follow when giving out presentation to the angels:
Offering too much equity upfront is not advisable
Do not offer a high amount of stake in your company right away. You might want to give a bigger stake in return for a major funding. However, that is going to cost you in a long run when expenses will increase.
Alternatively, you could also need more funding in future leading to more equity allocation to angels.
Hence, it is better to start giving away small portion in your company so that more equity allotted to the angel investors gradually as the company grows.
Know your business statistics well before convincing others
You should be sound enough when presenting financial statistics in front of the angels. They will have a close look at where your business stands in the distant future.
In addition, they will be highly interested to know how confident you are with your own business. This will help them to take decision in a much easier way.
If you are weak in statistics, just bring in the best math expert on board to help you with your presentation. The angels will be looking forward to you talking on how much time it will take to breakeven and how will you beat the market as well as raise above your competitors.
All you have to bring to the table is company’s net worth, revenue, projections, research, and reasonable expectations related to profits. In short, you should own your numbers.
Put yourself on payroll to respect your identity
It is very important to include your own salary and annual income while calculating overall expenses of the company. The investors surely expect that. They really want to see whether you are aware of all the expenses that the company would actually incur.
In addition, they would be able to gauge your personality that you do not consider yourself superior than the company and that you see yourself as an employee too just like others. If you respect yourself, then investors will surely be respecting you as well.
