For a first-time entrepreneur, securing funding for a new venture can be one of the trickiest parts of launching your business. Knowing who to ask and how to ask can make or break a company.
While there are several ways to approach financial support for your company, angel investors are becoming increasingly popular. As opposed to venture capitalists who generally form companies and use money from funds, angel investors are affluent individuals who use their own money to fund startups.
There are often fewer regulations governing angel investors, making them alluring to entrepreneurs with new ventures. For many brave business people, querying an angel investor is one of the best ways to secure the capital needed to get started.
A Solid Plan
While angel investors do not have company policies to follow the same way a venture capitalist might, they are also far more likely to be skeptical. After all, they use their own money, not a pool of invested funds. Approaching an angel investor takes bravado and, most importantly, a solid plan.
Before even contemplating a meeting, do thorough research and planning. Find individuals willing to fund new projects who have experience in your industry. Look into their past ventures and see where their successes and failures lie. The better you understand your prospects, the better your chances will be.
When you meet with an angel investor, come prepared with all of the details you know about your venture and the investor’s past history. Be ready to discuss every detail of a potential investment. Regardless of whether or not they are interested in you, the investor will want to make sure you understand what your chosen industry. Be prepare for anything they might ask you. You never want to risk to chance of being seen as knowledgeable, confident, and prepared for the challenges ahead of you.
The more excited and confident you are, the better you will come off. Explain your concept thoroughly, especially where your revenue streams will be coming from and why you think it will work.
Come prepared with market research to clarify your positions. Angel investors are willing to take chances, but only if they can share your confidence. If you aren’t sure exactly where your business might end up, that’s okay. Share as much as you know about the potential routes it could take or the various ways in which you will be able to turn a profit. If you are following trends or predictions as a motivation for your venture, be as descriptive as possible.
Assuming you have the investor’s attention, be prepared to share what you plan on doing with their investment. Be very specific about the plans you have and the reasons you need capital. Think very carefully about this. No matter what, be honest.
Investors love to hear about product development, but less about marketing or advertising. Assure them you are using their money to support the core moneymaking aspects of the business rather than the less tangible benefits.
Angel investors can be a great funding resource if you know how to approach them. Be honest, straightforward, and be enthusiastic about your venture. Angel investors are willing to take chances, but only if you can convince them the chances will be worth it.
Article by Jason Knapfel. Jason writes for business law firm Horenstein Law Group in Vancouver, WA. This article was not intended to be legal advice.