How To Approach an Angel Investor For Funding

Written by Dave Lavinsky

How to Approach Angel Investors

If you’ve decided to seek out angel investors to fund your business, congratulations! This is a smart move that can give you the boost you need to get your business off the ground. But approaching angel investors is not something that should be taken lightly. There is a process and etiquette that must be followed in order for you to have the best chance of success. Below are some tips to help you succeed in the early stages of attracting angel investors all the way to approaching angel investors directly and securing their investment.
 

Prepare Yourself

Nothing is more important when raising capital for your early-stage company than being prepared when you meet with angel investors. This means having all of your ducks in a row and being ready to answer any and all questions that they may have. Three important ways to prepare yourself are to develop a solid business plan, to develop your private placement memorandum, and to prepare for due diligence.
 

Develop A Solid Business Plan

Your business plan is what will attract angel investors and sell them on your company. It should be clear, concise, and persuasive, while including a description of the company, financial statement, target market, marketing strategy, and management team. It should outline your business goals, strategies, and how you plan on achieving them. Overall, a solid business plan will show that you have a clear understanding of your business and what it takes to succeed.
 

Develop Your Private Placement Memorandum

A private placement memorandum is a document that outlines the terms being offered to the investor during a specific investment round. This document is important because it will provide all of the information they need to make an informed decision about providing funding to your company. This document should be well-written and free of any errors if you want to catch investors attention.
 

Prepare for Due Diligence

Due diligence is the process by which an investor assesses a potential investment. This usually includes a review of your financial history, business plan, and management team. Be prepared to answer any and all questions that the investor may have during this process.
 

Create A Solid Pitch Deck

A pitch deck is a presentation that you will give to the individual angel investors that outlines your business and why they should invest in it. It consists of slides that should be clear, concise, and visually appealing. The deck should tell a story that convinces the investor to invest in your company. Therefore, you want to showcase all your company’s strengths, such as your competitive advantage, market opportunity, and management team.

How Do Angel Investors Assess Companies

The key to successfully getting an angel investor is to understand how they assess companies. Angel investors are looking for companies that have high potential for growth and profitability. They will also assess your management team to see if they have the experience and expertise to take the company to the next level. Make sure your company and management team are up to par before approaching an angel investor.

Understand Your Business Goals

Before you can even think about approaching an angel investor, you need to know your business goals. What are you looking to achieve with the funding? How will the funding be used to grow the company? Be clear about your goals and how the funding will help you achieve them. Angel investors will have little confidence in your company if you are not clear and concise with your business goals.
 

Get A Valuation

A valuation is an important part of any investment deal. You need to know how much your company is worth before you can start negotiating with investors. A valuation will also give you an idea of how much equity you will be giving up in exchange for the investment. Most entrepreneurs will over value their own company, so be sure to use a non-bias valuation when preparing your business profile.
 

Have An Exit Strategy

An exit strategy is a must when you’re looking for funding from angel investors. They want to know how and when they will get their money back. Be clear about your exit strategy and how you plan on returning the investor’s money with interest.
 

Finish Your Business Plan for Angel Investors in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

And know it’s in the exact format that equity funders like angel investors want?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your angel investing business plan today.

 

Rehearse Your Pitch

Once you have all of the above taken care of, it’s time to start rehearsing your elevator pitch. This is your one chance to sell the investor on your company, so you need to make it count. Get all your facts straight and practice your pitch until you can do it in your sleep.
 

Ask Them Questions

This meeting is not just about persuading the angel investor to give you money. It’s also about getting to know them and seeing if they’re a good fit for your company. Be sure to ask them questions about their investment history and how they’ve helped companies in the past.

Some example questions you could ask an angel investor are:

  • What companies have you invested in?
  • What prior experience do you have in this vertical? 
  • What kind of companies are you looking to invest in?
  • How much money do you usually invest?
  • What is your role in the companies you’ve invested in?

Approaching an angel investor can be a daunting task, but it doesn’t have to be. If you follow the tips above, you’ll be well on your way to getting the funding you need to grow your business. Just remember to be prepared, know your stuff, and make a great pitch.
 

Frequently Asked Questions

There are a number of ways to find angel investors. You can search online, attend investor events, or even ask for referrals from people you know. Angel investors can be harder to find than venture capitalists, but there are still many out there looking for good companies to invest in.

An angel investors are usually high net worth individuals who invests their own money in early-stage companies. A venture capitalist is a professional investor who invests other people's money in companies. Both types of investors are looking for companies with high growth potential.

A private placement memorandum (PPM) is a document that provides information about a company to potential investors. It typically includes information on the company's management team, financials, and business plan.

Due diligence is the process of investigating a company before making an investment. This usually includes reviewing the company's financials, legal documents, and business plans. Angel investors typically do their own due diligence or hire someone to do it for them.

An exit strategy is a plan for how and when an investor will get their money back. It typically includes selling the company or taking it public through an IPO.

 

A valuation is a process of determining how much a company is worth. This is usually done by a professional appraiser. Valuations are important in investment deals because they help determine how much equity the investor will get in exchange for their money.

 

Finish Your Business Plan for Angel Investors in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

And know it’s in the exact format that equity funders like angel investors want?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your angel investing business plan today.

 

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