Authored by Geoff Vaughan in Small Business
Published on 10-26-2009
Angel Investors are individuals who provide money to start-up companies in order to profit later when the business is successful. Most of these people are successful entrepreneurs; their goal is to help new entrepreneurs get started and become profitable. Angel Investors usually fund between $10,000 and $1.5 million towards a small business. In addition to offering money, these entrepreneurs offer advice, expertise, and often contacts to help the new business.
One way to find an Angel Investor is to know what profile to look for in a person. According to the Center for Venture Research at the University of New Hampshire, Angel Investors share several characteristics: The average age is 47 for these investors, and they are typically college educated, self employed, earn over at least $90K a year, have a net worth of at least $750K, and invest an average of $37K per business venture. It is rare for these investors to put more than a few hundred thousand into the business and they usually invest within 50 miles of where the live or work. Most of the investments they make are for start-up small businesses with less than 20 employees. These investors expect that a third of their investments will lead to capital loss, but that the successful businesses will produce a 26 percent return to them for initially investing in the company. These investors usually only accept and fund three out of every 10 people who request their assistance. Knowing these characteristics will help you find the right person to invest in your business.
The best way to meet an Angel Investor is through someone in your business. You are more likely to get the support of someone who knows you, or a friend of a friend. Finding someone local may also involve networking. If you do not know anyone who knows anyone where you work, you should start joining local business clubs, professional organizations, and area trade groups to try to meet potential investors. Another avenue to find Angel Investors is through the Internet, where you can do a search for your geographical location. It is important to try to stay as close to home as possible in order to get an investor. Angel Investors like to be involved in the business, so they rarely invest outside of a 50 mile-radius of where they live.
Once you find someone who may invest in your company, you will need to meet with the person and show them a well-prepared business plan that demonstrates what you will do with the money and why you need this financing to get the business going. A one-page executive summary can be a good visual in explaining the investment, and you should also be prepared to explain how you are going to pay the money back to the investor, or what kind of equity the investor will receive in return for the investment. The more prepared you are for the meeting the more confident you will be when you present your plan.