Angel investing has become quite a popular way of financing startups and new business ideas as well as injecting money to sustain ongoing ventures. Unlike venture capitalists, angel investors are often focused on seeing the startup make its first steps rather than evaluating possible profit. Nonetheless, the possibility of a solid return is still very important when reviewing since they receive numerous proposals and business plans every day. It is, therefore, crucial to have a solid business plan and investment structure when writing a proposal or looking for angel investors, but what is angel investing?
What is an Angel Investor?
An angel investor is a person or group of people who choose to invest in a small startup or in entrepreneur(s). They may provide a one-time startup capital for the business or inject money into the business from time to time. Angel investing basically involves providing financing for small ventures. The investor usually profits from the business and offers various terms that will be used for profit sharing. There are several angel investors n the market and while finding one is never a problem, convincing them to inject money into your idea can be overwhelming. About half of all the proposals are rejected so you need to ensure everything is perfect before you approach investors. The three important things angel investors are looking for include the following;
a) Potential for ROI
Angel investors will only invest in an idea or startup with a potential for high return since they are risking their money in your business. It is therefore important to ensure you have a solid strategy and timeframe that describes how your business will make money. It should be a reasonable idea that offers a real potential to make a profit.
b) Competent management team and structure
There is no way around having a competent, experienced and skilled management team with leadership qualities. You need people that are knowledgeable, experienced and skilled in the business and field you want to pursue to lead the business to its glory.
c) Solid business plan
As aforementioned, no angel investor will pump money into your idea if it does not pose as a solid plan that is complete and convincing. The plan should detail a completed version of your business and strategies of how you will get there. You must include all details including financial projections, market specifics and marketing plans.
Other things include opportunities to be actively involved as a mentor and viable exit strategy among others. Remember that most angel investors are or have been successful entrepreneurs and as such, have a keen eye for ideas that will actually succeed. It is also important to choose the right angel investor since there are various kinds including;
- Super angel – they invest in various projects and startups at a time.
- Domain angel – choose specific niches or industries to invest in.
- Previous colleague angel – investors that may have worked with one of the members in your team.
- Friend and family angel – these are the proverbial investors that make the first commitment to see your business through.
- Grouped angels – a group of investors who have come together
Other categories include fellow entrepreneur angel and true believer angel.
It is required for angel investors to meet all the SEC (securities-exchange-commission) standards to qualify as accredited investors. This requires the investor to have a minimum annual income of $200,000 and net worth of $1 million. Before you approach any angel investors, review them to determine if they are reputable and trustworthy. Go through all the terms and verify their status as angel investors.