Angel investors provide capital to startups usually in exchange for convertible debt or owner’s equity. For a newcomer finding angel investors can be quite tricky as every industry has its own trade secrets that only come from years of experience. Hence, newcomers would not have a clue and so more times than less, their ideas do not get the standing ovation it deserves that easily! But we will help you figure out how to present your business idea to investors so that it clicks!
But first, let’s check these 5 important points from your list before proceeding to find angel investors or business angels for your startup.
1. Know Your Investor
There are two categories of business angels or angel investors. Analyze the two and see which category would be the best fit for your startup.
This refers to an individual or institutional investor who has met certain requirements set by the U.S. Securities and Exchange Commission (SEC). The person either has a net worth of USD 1 Mn or earns USD 250,000 per year for at least two years in a row. The SEC terms them as sophisticated investors and does not provide protection to them.
This refers to an investor who does not meet the net worth requirements set for an accredited investor. They earn less than USD 250,000 per year. They are termed as unsophisticated investors and the SEC provides protection to them.
2. Smart Money vs Dumb Money
The urge to find an investor for startup sometimes blurs smart thinking. Are you taking your investment deck to each and every investor whom you think would invest in your startup? Why so? We will give you a small heads up on the psyche of investors. Let’s say, your startup outsources to the hospitality industry.
There are two investors who are keen to invest in any startup. Whom would you choose?
A – who owns a small motel. He or she has set up a considerable fund and is willing to invest in another startup.
B – has a significant amount of funds but does not belong to the industry that you are in.
Well? Which one would you choose? Does it even make a difference since we are only concerned with either of them having money to invest in your venture?
Well, getting money from either would be great but with investment, wouldn’t you want an investor who also understands the pitfalls of being in a startup? If you get investment from someone who doesn’t understand your industry, then you might get into the nitty-gritty of explaining each and every problem and possible outcome to the investor. Saves you the added worry, right! So invest in smart money instead of dumb money. Smart money being, going for an investor who would understand the industry that you are in. Also, remember the below formula to help you identify ‘Smart Money’ investors.
SMART MONEY = MONEY + CONTACTS + ADVICE + EXPERIENCE
1. Where to Look First
Family, Friends, or Personal Network! These are the first places to look when trying to find an angel investor. Once, these avenues are exhausted, see the following most important routes to finding an angel investor.
- Fundraising Events
There are numerous fundraising events where investors participate to find lucrative projects. Be part of such events. Scout out ‘smart money’ investors who would be interested in your project and give a brief gist about your startup.
Heads Up: An investor would meet many investment hunters in a day and would not have the time to listen to long glorious descriptions of projects. Keep your outline crisp and interesting so that an investor is interested to speak to you further.
- Accountants/ Attorneys
Sometimes, the way to an angel investor is through their accountant or attorney! Try to get in touch with them and give a brief outline of how profitable your startup would be if you get the required investment. Lure the accountant or attorney in convincing your prospective angel investor.
You might know of or are connected to a startup that has a new investor coming on board. Try pitching your project to that angel investor who might be interested in looking at your startup as well for future investment.
3. Step-by-step Documentation
Now, that you have an investor’s attention, consider the following step-by-step documentation that you will help in you getting the investor hooked till the deal is signed.
- Executive Summary
Ensure that the summary is 3 pages or less in length.
- Pitch Deck – 10/20/30 Rule
The 10/20/30 rule ensures that you stay within the guidelines of presenting a concise pitch deck.
10 – denotes the number of slides that should be in the deck.
20 – denotes the number of minutes it should take to present the deck.
30 – denotes the size of the font that the deck should be comprised of. This would restrict the presenter in putting in longer sentences in the deck.
4. Business Plan
A business plan outlines the business goals of your startup, the method in which you plan to achieve them along with the time frame.
5. Private Placement Memorandum
These are legal disclosure documents used by small businesses raising money through private securities transactions.
Where to Find Angel Investors in Los Angeles?
- Alumni Alliances
Alumni Alliances is a professional alumni network that houses students, graduates, and alumni from one Alma mater. Through the network, you can find out fundraising events in which you can participate in the Los Angeles area. You can also set up events virtually as well as get in touch with prospective investors by publishing a post through their ‘Raise Capital’ feature. The best thing about this network is that it is a concentrated community so you are not amongst the thousands, searching for a prospective investor. Sign up today to know more!
This network also has a list of angel investors who would be happy to come on board to invest in your startup.
- Via Capital
This is another network that also illustrates the process of finding investments such as, having a targeted list of investors, assessments and recommendations, pitch deck and one-page summaries, etc. Here you can also find angel investors for your startup.
We have completed our 5 secret strategies to find your angel investor. Would you like to add in your ideas? Get in touch with us immediately through the comments section below so that we can help others in finding their angel investors. Do bookmark Alumni Insider for more helpful articles like this!
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