Finding an Angel Investor

An angel investor is one who invests her own money into a business -- usually at the startup stage. The common belief of angels is that they're all millionaires. It's not true. Most angels make $50 - 100,000 annually, so they're all around you. You don't have to confine yourself to the typical doctors, lawyers, accountants, and other businesspeople that normally stereotype the angel investment community. It's a good chance your Uncle Joe who lives in that nice home can also be your angel investor. Relatives, friends, acquaintances, and business associates are some of the most used angel investors. Why Go to an Angel Investor? If the bank can't provide you a large enough loan, or if venture capital is too large for your needs, angels make the perfect fit. Most are willing to invest up to $100,000. Also, venture capitalists are now reluctant to invest in startups after the dot-com bust. Angels are more willing. You can help win them over with a great business plan. A strong relationship with an angel wouldn't hurt also. What They Want Like venture capitalists, an angel investor wants a large return on their investment. If your company isn't the fast-growth type that can bring in top profits, you'll have a harder time dealing with angels. Don't let this stop you though. If you have good contacts with angels, or already have solid relationships with them (chances are, everybody does), most are willing to help you. They may not send stockpiles of cash, but they'll give you enough capital to jumpstart your company. Remember, like all investors, they want to know you're a good investment. Have a concise plan on hand that describes your company in one paragraph. Prepare for a detailed business plan that shows them you understand your industry. And get ready to answer a variety of questions. This could range from marketing plans to five-year personal goals. What about Control? It depends on the type of angel investor you have. Some are willing to give you total control. Still, others may want detailed financial statements weekly, and will want hands-on control at managing the company. Make sure you know and can accept their desires in exchange for capital. In most instances though, angels will provide you the control you need to run your business effectively. They will mentor you along the way to help your business succeed. A Graceful Exit As your company becomes established, your angel will want to cash out. Make sure you work out exit strategies with your angel before any surprises erupt. Understand how and when you two will end your relationship on good terms. For those that don't have enough startup cash, an angel investor is a great small business resource.

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Posted on February 18

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