If an individual has a unique idea for a new business venture, then the opportunity
to obtain funding from angel investors can allow them to take their
new business idea to the next level. While there are many individual investors
to choose from, there are also many national and local groups of angel investors
available.
Angel networks
Each
angel network operates in a slightly different manner. For example, some
angel investors may charge an immediate fee for consideration of an application,
while others may not even request such a cost until the prospective applicant is
approved. There are some angel investor groups with websites that encourage the
applicant to fill-out an online application form, while other groups may accept
a written funding request through
direct mail. While the process can be extremely competitive, all angel investor
groups often have an extensive screening process to ensure their investment is legitimate
and shows promise of profitability in the years to come. Entrepreneurs must be patient
during this time; however, those who do not want to go through such a screening
procedure should exhaust other monetary avenues (personal savings, money from family
and friends, bank loans etc.) Often times, other
sources of funding may only provide a portion of what angel investors can
offer.
Angel network distribution
There are several websites that can help individuals find networks of
angel investors. These lists are usually compiled according to geographic
location. Listings are divided into eight regions including the Pacific Northwest,
Southwest, Mid-Atlantic, Northeast, North Central, California, South, and Midwest.
There is also a category for those groups that may consider investments located
anywhere in the country.
Key components that appeal to angel investors
When approaching angel investors for startup
capital, entrepreneurs should have a well-rehearsed pitch along with a detailed
business plan. Angel investors, unlike family members and friends, always request
a complete business plan because it gives them an idea of what the prospective company
and its products and services are all about. Technology companies that seek angel
capital are encouraged to have a working prototype of their business idea, as well
as feedback from consumers who tested the trial product. Business owners should
also provide their angel group with references
from their previous clients because they can provide valuable insight into the work
ethic and credibility of company founders.
Insider support
Angel investors usually form networks of
people so they can cumulatively invest large amounts of money in a given investment
project. They typically make their business decisions based on the response of membership
votes; therefore, it is an added advantage for an entrepreneur to have at least
one ally among the group. One way in which business owners can win over a member
of an angel group is through group member
research. They should read the biographies of all members of the network and try
to earn the confidence of an angel member. By winning over a member in a group of
angel investors, business owners stand a higher chance of earning capital for their
project.
Angel network market sector
During the research process, the entrepreneur can also find out the interests of
the prospective angel network. This can be determined by reading about the previous
projects the investors have funded.
Some networks stay within a specific industry, while others have a more
diverse portfolio to their name. For example, some angel investor groups primarily
fund technology-based companies, while other networks invest in a wide range of
companies, including biotechnology companies and restaurant franchises. Therefore,
the choice of an investment for an angel investor
greatly depends on the overall interest of the group.
Benefits of angel groups
Finding an angel investor group for
startup funding can be a tedious process; however, the overall advantages
of successfully obtaining angel capital can certainly outweigh any drawbacks encountered
during the process. One benefit of attaining angel capital is that the angel investors
often play an advisory role in their invested company; they can guide the new business
owners during the early stages of entrepreneurship. Their experience also enables
them to diligently address issues that may occur among management and staff within
the company.
In addition to their wisdom and enthusiasm in helping a new company move forward,
an angel group investment in a new company can stimulate local economic growth by
offering employment opportunities to prospective job seekers. They are also often
involved in a plethora of community-related sponsorships, further uniting local
communities and causes. Another major advantage of obtaining the financial support
of an angel group is the opportunity for the
new business owner to focus all of his/her energy in building a business
rather than being overwhelmed with expensive monthly repayment costs other loans
require. In addition, the financial investment can also lead to a solid relationship
between the investor(s) and
entrepreneurs since involvement often entails several years until the exit.
Conclusion
Angel networks are located just about everywhere. While each group may have
different requirements, all have a similar extensive screening process. It is always
an advantage for an entrepreneur to have the support of one member of the angel
group since the decision to invest primarily entails membership votes. Entrepreneurs
can certainly build relationships with members of the group by researching their
background and areas of investment. The benefit of
angel capital is the experience and skills angel investors bring to a new
company, their passion for the job and community, and flexible agreement terms for
the new business owner.