So, you are looking to raise angel capital or “angel money”? At Under30CEO we believe in keeping your business ultra lean. This means laying out as little money up front to start your business and keeping your overhead and living expenses as low as possible. While it doesn’t sound glamorous, it keeps your risk low and retains as much equity in your company as possible. There is nothing worse than over leveraging yourself while starting your business. If there is a way to keep costs down you need to find an innovative way to take advantage of it. It also teaches you to think creatively and be as resourceful as possible.
If you must raise money, first you’ll want to prove your concept and put in some money of your own. Check out our guide to bootstrapping to get you off the ground and prove your business model works. This is what your angel investors will be looking for–proof you won’t squander their money and that you have “skin in the game”. This means, complete commitment on your part as well as your own money into this venture. If you haven’t put time and money into your business why would they?
Why You Need An Angel
Simply put: because your “friends, family and fools round” simply sometimes isn’t enough. When you need to raise in excess of $50,000 your immediate network may not be enough. It’s time to look for a wealthy individual to invest in your startup. Unlike venture capitalists, these investors are putting their own money at stake instead of investing someone else’s. Angels typically invest 6 figure sums into your business. Once you are looking at millions of dollars in investment, it will be time to look at venture capital.
Normally these angel investors have done well for themselves as entrepreneurs, want to help a young entrepreneur and be involved in the trials and tribulations of being an entrepreneur without being involved in the day to day hard work. Often times they will fall in love with your idea and really want to be part of company because you remind them of themselves at a young age or their son or daughter. Take full advantage of this mentorship.
How to Find Them
It’s time to start networking! Reach out to other companies in your industry and see who has invested in them. Ask for an introduction when you have your one page business plan together and your pitch perfected. Call your local Chamber of Commerce and Economic Development Centers as well as local business schools who may be able to point you in the right direction.
Who do you want to model your business after? Go look to the person who owns that business. The more in tune they are with your business the more likely they will want to invest and the better mentors they will be.
Lastly start to look for angel networks around your area. Check out http://angelsoft.com to do a search and see what you can come up with.
What to Watch Out For
- Try to find an investor who can provide you office space. Maybe they have a few extra desks in their building. This will keep you in close contact with your investor and save lots of money.
- Keep their spouse happy! Venture capitalists have a whole board of people to keep happy but the only person you’ll need to worry about is your investors spouse. Make sure they understand your business because they’ll be giving the greenlight.
- Don’t fool the old rich lady. Just because someone has money doesn’t mean you should risk it all in your business. Make sure they can afford to lose the money.
- This is big money and you need to hire a good attorney to help you structure the deal and figure out how much equity to give up.
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