Not all Angels are in Heaven: How to Choose an Angel Investor
When starting your own home business, it’s crucial that you have an adequate amount of start-up capital. 
For those of us that don’t have enough in the way of assets, locating an angel investor willing to invest in our business may be the best way to go. An angel investor is a wealthy person looking to invest, usually in the same fields of business they became successful with, as this can lead to working together and helps ensure success. Typically speaking, an angel investor is going to be looking for someone that has a business plan, great product, or can otherwise demonstrate why their business will be successful. For those starting a business near a large metropolitan area, you should be able to find an angel investor in your chosen niche.
Should you seek an angel investor?
Keep in mind that you will most likely need to offer partial ownership of your business in exchange for an angel investor’s money. This means that you may need to relinquish some control in your business to these investors. This can be a good or bad thing, depending on how you want to operate your business. Since most investors are going to put money into the type of business they have experience with, this outside help can actually be really useful.
Additionally, you may have to give the angel investor a chance to leave in the form of a buy-out policy from larger investment firms or public sales of stocks. Don’t just sign up with any investor, make sure that their wants and demands match what you’re willing to give and compromise on.
Peek at their Portfolio, Learn about Them
If you find angel investors that might be interested in your business, try to take a look at their portfolios before making any large decisions. This serves several purposes. First of all, it lets you see how you fit into the big picture. Secondly, if they happen to work with a large amount of companies in the same field (but not competing for business), then it is probable that the synergy created between the companies will help you succeed. This also means that the investor is more likely to work with you, since you can improve their portfolio and profits.
Similarly, make sure that you understand the history of the business (man / woman) you’d be working with. If they have a long history of failed businesses, questionable business practices, or otherwise unsavory things come out during your searches, then it’s probably going to be best to avoid them.
Find Locals
Look for local angel investors. Trying to work with a big investor that doesn’t know about your distribution area and clients will likely be less helpful than someone nearby. Additionally, a hands-on investor usually wants to be near their investments, meaning you and your company. Many largest cities are sure to have an angel investment group or organization, and that’s your best bet for finding an investor.
Resources
To help you get started in your search, here is a small list of websites that may help you find an angel investor.
- Gust – Directory of Angel Investors: http://gust.com/en/angel-
investing/directory
- Go4Funding – Angel Investor Network: http://www.go4funding.com/
Articles/Angel-Investors/ Angel-Investor-Network.aspx
I already have an angel investor, who wants to invest in my business, but the only problem is that he wants too much control over the business. It’s hard enough to find one angel investor, so I don’t know if I want to jeopardize my relationship with this one and look for another one. I believe in my business plan and even my banker friend thinks that it’s a sound one. It’s a shame that I can’t find an investor who’ll give me a little more freedom to run my business.
@Carl Before doing a business with your angel investor, ask him/her in a nice way the reasons why s/he wants a control. Some investor wants a control to protect their investment while others believe that they can run the business better. If it’s about investment protection, advise him to ask his lawyers on various clauses in the contract that could help protect his investment.
“A bird in hand is worth two in the bush”, It’s hard to find an angel investor, try to work it out with them so that you don’t miss out on funding your business. But if he is unwilling to compromise with you, you should consider looking elsewhere. This could be indicative of how working with this investor will be in the future
I’m in the process of searching for an angel investor and I needed little guidance on how to proceed with the search. There are already two people who are interested, but it’s nothing too major like agreeing to invest the money. For now, it’s just interest. It’s been tough trying to convince total strangers that I have the next great business idea, so it’s very exciting when someone wants a sit down and wants to discuss the business further. It’s a slow progress, this business of finding an angel investor, but I believe I’ll find a good investor as long as my business plan is sound.
Hi Larry! I know the process of finding the right angel can be a long and hard one, but its worth it! Don’t try to force your idea on your potential investor. You want to make sure all parties feel comfortable and are excited about your business. Just follow up with them and be patient . A solid business plan is a must, make sure you really played up your experience in the industry and the reasons why your business will succeed! If you found this article helpful please don’t forget to share it with your friends!
Good Luck!
Mel