How to Contact An Angel Investor

Sooner or later, almost every entrepreneur that decides to embark on a journey of building an innovative product, is faced with a problem of a lack of cash. Meanwhile, as the most famous business and management gurus say, cash is king. The question of how to attract funding is thus asked a lot amongst entrepreneurial circles. There are a few answers to this question, which differ by their nature and the choice of one depends on your specific goals and business directions. One such way of attracting funding can be a business angel. In this article, we talk about how to interest a business angel and get investments.

To begin with, let's dive deeper into who business angels are and why entrepreneurs are hunting for them. Business angels are private investors with entrepreneurial and managerial experience, and in most cases - with enough funds to cover the costs of a business. Some of them can be top managers of large companies or active entrepreneurs. Business angels often provide not only financial but also expert support and advice to startups in the early stages of development.

This support gives startups the resources they need initially in order to turn their idea into reality.

Of course, such financial and experience support does not come for free. In most cases, business angels will invest their own funds in exchange for a significant stake in the business and a decisive voice in management issues. Subsequently, after a successful take-off of the company, business angels might want to sell their share for a much more impressive amount than what they invested, thus making a profit.

Business Angels vs. Investors

There exist many different ways how one can become an investor. A very popular practice, for example, is buying shares and becoming a shareholder - that's how an investor invests in the development of a company. However, this way the investors' rights and opportunities will be limited depending on their stake in the company. Another way is to invest in a fund, where managers will choose assets for investors with expectations of making a profit for investors.

Business angels, on the other hand, can invest on their own. They can choose a startup at their own discretion and set their own conditions. This is beneficial for the company - relations with private investors are more flexible than with venture funds with a set of rules and strict conditions.

Venture funds work in a similar way, only they invest in companies that need funds to start or the next stage of development. An important difference is that a venture fund determines in advance what type of company it invests in and on what terms.

Before you start looking for a business angel to implement your project, you need to understand that every business angel is an investor, but not every investor is a business angel. As we mentioned above, in most cases business angels are people with entrepreneurial or managerial experience, top managers of large companies, and economists. Every fifth successful and experienced business angel is a millionaire.

The main characteristics of such angels:

• They invest in projects only using personal funds;
• They have more managerial powers due to a lower income rate;
• They tend to invest money at the initial stages of project launch;
• They give advice in the process of project development, and provide assistance in the form of connections, experience, and knowledge;
• They have a personal stake in the project;

The fact that a business angel can afford to invest in a start-up does not mean that he or she will do so with any business. Openness to new business ideas and willingness to become a mentor for young entrepreneurs does not mean that an angel will start giving out money for free.

It's important to remember that business angels have years of experience, they're famous investors and businessmen. That means, that they know how to evaluate opportunities and choose the best ones of them while discarding the ones that are not going to bring profit in the future. As such, if you want to find the right approach to an angel investor it will be a good idea to read about the process, as well as conduct a detailed preparation of the project and presentation.

To grab the attention of an angel investor and attract them to your business, your proposal or pitch to such an investor should contain:

• An accurate description of the target audience. The wider the target audience, the more attractive the offer is for a business angel;
• An idea that will be able to distinguish your product from those already existing on the market. Your idea should make your business stand out from the competition, a concept known as USP - Unique Selling Point;
• A detailed business plan that will contain all the necessary information about the product;
• A professional team that can achieve the goals and metrics set out in the business plan;

According to statistics, out of 10-15 projects, only 1-2 end up being noticed by a business angel. However, don't get discouraged if you hear one "no" - you should rather take it as a guide to action, and learn about why a business angel does not think this project is worth investing into. With this knowledge, you'll be able to learn from your mistakes and roll out a product that will change the world.

Finding a business angel is never easy. Although they usually are also on the lookout for promising start-ups, connecting to an angel that is the right fit for your business might take some time, and it's best to be prepared for it. Follow these 7 steps in order to successfully secure investment:

1. Prepare all documents and investment packages for the project
2. Search for investor contacts (there exist certain tools to look for personal contact channels)
3. Send a request to potential investors
4. Negotiate, jump on calls, and answer investors' questions
5. Obtain the Term Sheet - the preliminary terms of the transaction
6. Conduct Due Diligence - business audit
7. Sign the contract

Do not get discouraged if after all your efforts a business angel hasn't gotten back to you with a response, or decided not to invest. Just like everything else, pitching your idea to investors is a skill that can be learned and developed with practice and discovery. Spend enough time preparing the presentation, as well as the project itself, and don't forget to think about it from your investors' perspective!