Do you own a startup or you are thinking of founding one and you need angel investors? You might be asking, who are angel investors, where do I find them, and how do I convince them to invest in my startup business or dream? These and more are what we will be reviewing in this article.
Who are Angel Investors
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An angel investor is a person who invests in businesses or startups with their own money while looking to get some equity from that company or start-up.
Angel investors come in different shapes and forms. They could be influential or affluential individuals, venture capitalists (investors that not only invest their money but also offer managerial services to the business in order to drive growth to the business), etc. An angel investor is also known as a private or seed investor.
In the 4th quarter of 2021, funds that had been raised through angel investments for “early-stage funding totaled $61.1 billion dollars, shared across 8000+ startups. In the same year 2021, funds raised from angel investment accrued to about $210 billion. This is to tell you that money is not your problem in funding your startup.
How about Fintech Startups?
According to Dealroom.co, the Fintech industry received about $121.6 billion from venture capitalist investments in 2021 alone. AI startups attract a ton of $24 billion annually. Check out this guide to learn how to start your own Fintech company without breaking the bank.
The size of angel investors and venture capitalists has grown sporadically, with seed angel investment deals shooting up to as high as $10.3 billion in the first quarter of 2022 only. In the first quarter of 2023, seed funding totaled $6.9 billion, down 44% year over year.
Since you now know that capital is not necessarily a limitation to you starting or growing your business, and there are angel investors ready to put their capital down to support your business, how then do you attract such individuals to your startup? This article will show you how to find the right investors and attract them to invest in your startup.
Why Do You Need Investors?
There are several reasons why you will need an investor. Firstly, you need capital to kickstart your idea or startup. Secondly, you need high-valued networks and connections with people in the same business line as you. Thirdly, you need potential business partners, and experience-based advice from VCs to launch your startup successfully.
What You Need to Have Before Looking for Angel Investors
Now, before you begin to look for an investor, there are certain things you need to have and do to garner the attention of these people.
Firstly, you need a fully registered business. Secondly, you need to have your business plan professionally written and be ready to pitch if the opportunity presents itself at any time. And thirdly, you need to have the right information about who these people might be and where you can find them.
Let’s look at some of the best ways to Attract these angel investors and make them interested enough to invest in your startup.
1. Write a Good Business Plan
When you approach a potential investor, the first thing they want to look at is your business plan. They want to see if you have clear goals and objectives. They want to know if you have clear data on how you plan to generate revenue, and most importantly how you plan on making profits.
The metrics for tracking and measuring this growth process are also important to them. Remember, inasmuch as investors are interested in making money, they are even more cautious not to make wrong choices that will lead them to lose their money.
Statistically, 9 out of every 10 startups fail. About 21% of them fail in the first year, 30% fail in the second year, about 50% fail in the first 5 years, and about 75% fail in about 10 years of business. This is not to deter you but to show you why investors are skeptical and always very cautious about where they put their investments.
Since this is a key factor in an investor deciding if they will entrust their capital to you or not, let’s look at the major components of a well-written business plan.
- Executive summary: Your business plan must contain an executive summary. This is more like a general overview of what your company is about, what problems it wants to solve, how it wants to go about solving the problem, the tools and resources you will be using, etc.
- Company description: This describes in detail your company or startup itself, your vision, value proposition, etc.
- Products/services: This is where you talk about the products and/or services you are bringing to the marketplace. You must explain what makes it unique or different from those of your competitors.
- Financial and operation plan: Let your investors know your financials and your operational plan. How you plan to use the startup funds and how you will be running your day-to-day business. From employees, salaries, office runs, maintenance, machines, office equipment, logistics, etc.
- Target Market: This is where you define who your target audience is in the most specific terms. Don’t just say your target market is the middle class or Men and women. That won’t be specific enough. An ideal target audience would be middle-class women between the ages of 18-35 years that are gainfully employed.
- Market Analysis: Your market analysis should speak to surveys or research you have done on your target audience, what they are interested in, what triggers them, what they spend their money on, and so on and so forth.
- Marketing strategy: This should define the exact day-to-day steps you will be taking to showcase your products/services to this target audience in a way that brings about the KLT (Know, Like & Trust) Factor, that will eventually lead to sales.
- SWOT Analysis: Let your investors be aware of your startup’s strengths, weaknesses, opportunities, and threats. That way, they will be fully aware of what they are going into. In the case of a venture capitalist, it would give them an idea of how to step in and help you grow your business.
- Value proposition: Your value proposition literally means what you are bringing to the marketplace. This is also where you have to state the reason why they should buy from you or do business with you.
- Revenue and profits: You should have a clear idea of how you plan to generate revenue from the business. State your potential profits (after cost) you will be making daily, monthly, quarterly, and annually.
- Budgeting: In this budgeting category, you are to give an estimated value of what it would cost to get this idea running.
- Exit strategy: Give your investors a clear exit plan at the expiration of their investment. A very common exit plan is investors selling their shares off, and handing over equity collected back to you the founder, while they work away with their profits.
You are to help your investors see and share your vision of the startup, the business potential and how much they could make. Make sure you have your game on 100% when it comes to your business plan.
2. Engage in Cold Prospecting
Armed with your business plan you can now start approaching investors to discuss your plans with them. If you have done good research while writing your plan, it shouldn’t be difficult to sell yourself and your startup idea to intending investors.
One way to cold prospect effectively is by using the direct emails of the investor you want to reach, not the company email address. There are software tools you can use to get anyone’s direct email address. Rocketreach.com is a good place to start from.
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3. Showcase Your Social Proof
One very solid way to attract perfect investors is by showcasing your social proof. What has your startup been able to do or achieve within a specific period? Show undeniable proof with facts and figures. The right social proof will attract perfect angel investors to your startup.
4. Pitch Your Family and Friends
The potential investors you can easily sell your business idea to and instantly get their attention are your close family and friends. Gaining their confidence in your abilities to run your business won’t be difficult.
5. Public Speaking Engagements
Public speaking is a good medium to sell yourself and attract the ideal angel investors to your startup. It gives you ample opportunity to convince your audience of your ideas using your unique value proposition.
If you can deliver a persuasive speech, you should be able to attract good and quality investors to your startup.
Be intentional about attending and networking at business events. At industry events near you, you are more likely to meet potential investors.
There are so many things you can do to attract potential investors; from your dress to carriage, mannerisms, and finesse, you can catch the attention of many. Then go on to subtly pitch your idea to them, having all your facts and figures in check, tactfully answering their questions, exuding great charisma and confidence. The likelihood of attracting a good investor at industry events is very high.
7. Business Pitch Competitions
Business pitch competitions will give you a great advantage in finding perfect angel investors. These programs are designed in such a way that the investors are already there. All you need to do is to convince them with proven facts and figures to invest in your business.
8. Know Your Numbers
One of the things that will help you get the attention of investors is know your numbers. How well do you know your numbers? Again, if you’ve done good research or have documented your data and your startup is already running, you should know your numbers. You would need it to convince your potential investors.
You should be ready to answer questions too. Despite the good business plan, you’ve written and a good pitch or speech to communicate it, knowing your numbers is very important. a potential investor would still ask you lots of questions.
9. Seek Mentorship
Pay for mentorship or pay to get access to potential investors. A mentor is someone who has experience in the field you are just beginning to play. Most mentors are willing to guide you on how to go about your business the right way.
You can also carry out volunteer services for a potential investor. Offer your skills and services to them voluntarily. Once they see how good and well-equipped you are, they may choose to honor you with their advice, support, and investments.
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10. Invest in Your Marketing
Sell yourself and your startup with every opportunity you get. Be very intentional about it. Document and share your journey as you go. Show proof of major activities going on.
Be loud about what you do. Talk passionately about your business. Be so good and so loud to the point they can’t ignore you anymore. This a subtle way of attracting investors and you might just be lucky that one or two might reach out to you before you even reach out to them. A great place to start marketing your startup is on social media. Equip yourself with all the laws of social media marketing.
If you just founded a startup or have an idea you want to bring to life, rest assured that there are people out there with the capital, willing and ready to fund your startup idea. It is left for you to position yourself properly to attract these angel investors to your startup.