How To Find An Angel Investor
Every month, 7.2k entrepreneurs are searching for the answer to this question:
“How do I find an angel investor to fund my small business?”
For those who aren’t aware, angel investors are generally individuals or funds who invest in early-stage businesses in a more organized and professional way than, say, friends and family. They invest in a business with the expectation that they will generate a profitable return on their investment (usually 5-10x more), typically within 3-5 years.
But before you can go out and find an angel investor of your very own, you have to evaluate whether or not your business even meets the investment criteria for an angel investor in the first place. Let’s dive in.
Is my business right for angel investment?
To find out whether angel investment is right for your small business, ask yourself the following:
- Does my business have high-growth potential?
High-growth means that your startup will likely grow very fast. For example, you will double or triple your profits every year in your first 5 years in business.
- Does my business fit the investor’s profile?
Do your research on different angel investors available in your market. What are their specific criteria for new investments? For example, Start100 is part angel fund, part accelerator, and part startup coach. With a little research, you can see how they invest in mass-appeal consumer products that are a good fit for crowdfunding (like Kickstarter or Indiegogo) and how they do not invest in solopreneurs.
- Does my business’ interest align with the investor’s interests?
Through that same research, find out who they’ve invested with already. Are they already doing deals with startups like yours? If so, it might be easier to get your foot in the door. For example, it would be a complete waste of your time to seek investment from a fund specifically for female-led startups if you’re not a female-led startup.
OK, my business fits the criteria. Now what?
Now it’s time to do some work.
1. Keep researching.
Continue the research you were doing on angel investors in your area or region. Review their portfolios and identify the businesses they have invested in that are most like yours. What similarities and differences do those businesses have compared to yours? Does your business fit their niche?
2. Create a “Why Invest In Us?” thesis.
“Why do you think you’re a good fit for us?” We’ve all been asked this question before during job interviews, but now it’s time to answer it for company.
Use the format:
- We may be a good fit for you because [we do this].
- We match up well to your profile in [this way], [this way], and [this way].
- You’ve invested in businesses like us who do [this], which means you can deliver more value than other investors for our business.
3. Test your thesis with a current company portfolio.
Now, start reaching out to founders of companies in an investor’s portfolio. The goal is to test your thesis and determine whether you’re a good fit for their angel investor. Simply find the founder’s contact information and run your thesis by them to get their feedback. Be truthful and honest. Be transparent and appreciative of their time. Make sure they know their feedback is valuable to you and your growing business.
4. Approach an angel investor.
There are a few different ways you can approach an angel investor. You can get a warm introduction from a trusted individual. You can get arguably the best introduction from a founder (which we talked about above). You can get introduced through a funding advisor or mentor who may have connections. Or you can go for broke and try cold introductions on your own — which doesn’t typically have a very high percentage of success, but it can’t hurt to try!
Whichever approach you take, always lead with your thesis. You should have already tested this with the founders you’ve reached out to, which means it’s solid and ready to share with actual angel investors. Remember to be persistent, be prepared, and be ready to give a high-level overview of your business at a moment’s notice.
Things can happen fast when you’re searching for funding from an angel investor. If you want to be able to catch any curveballs you’re thrown, you’ll need to master some funding fundamentals ahead of time.
- You might be asked to send over a one-page teaser about your business to an angel investor. Our training on Creating A One-Page Business Summary is exactly what you need to improve your odds of securing an investor.
- Angel investors generally have a focus. This Success In Business podcast episode talks even more about angel investor criteria and what you need to be aware of when looking into whether your startup fits in or not.
- Explore common business funding options, objectively assess the net benefits of each, and determine which options are worth exploring further in our Basics of Business Funding training.