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How to Raise Capital from Angel Investors Successfully

If you don’t have enough funds to kick-start your business or expand it, and getting a loan is an absolute no-no for you, then approaching an angel investor is one of the good small business financing options you have; especially when you have been disappointed by family and friends.

This chapter explains in detail, all you need to know about raising funds from angel investors. Some of the key points covered in this chapter include:

Now who is an angel investor?

An angel investor (or angel) is a high net-worth individual who typically invests in and supports start-up companies (or brand new ideas by existing companies) in their early stages of growth, with the aim of achieving higher returns than the typical public markets provide.

In addition to the funding they add to your business, angel investors usually contribute their time and experience, as well as offer introductions to valuable contacts that could be essential to the success of your business.

Recently, the trend has been for individual angel investors to come together to form “angel groups” or “angel investment clubs.” This trend has occurred because angels have discovered many huge advantages in working together, such as making better investment decisions and combining funds into larger and higher-quality investments.

Should you seek angel investment in the first place?

Well, I believe this is a question you alone can answer. However, I have prepared a list of questions that will help you decide whether you should approach an angel investor or not. If you are able to provide satisfactory answers in the affirmative, then you are good to go.

14 Questions You Must Answer Before Approaching an Angel Investor

  • Do you have an experienced, driven, and coach-able team?
  • Are you willing to cede some control of your business as well as decision-making authority to third-party investors?
  • Do you have a defined market segment (niche)?
  • Is there significant and demonstrable demand for your proposed offer?
  • Have you identified your potential competitors?
  • Have you defined your offer’s unique selling points?
  • Have you proven the concept behind your product or technology, and can your proof be confirmed with data or objective experts?
  • Have you protected your intellectual property?
  • Have you conducted extensive research to ensure you are not infringing on patents or trademarks held by others?
  • Do you plan to achieve widespread market penetration for your offer?
  • How will you achieve this as efficiently as possible?
  • How much do you need to start and run your business?
  • Does this cost cover growth activities, product development, recruitment of key staff, sales launching, and marketing?
  • Have you developed reasonable financial projections; including an income statement, cash flow and balance sheet, and supporting spreadsheets based on realistic, logical assumptions?

All these questions can be summarized into one big question: Have you developed a comprehensive business plan?

So, with an accurate, detailed, and complete business plan, you will be able to provide good answers to the above listed questions. If your business plan can answer the questions, then angel investing is the right investment option for you.