In order to learn more about this rather complex relationship between Angel Investors & Startups, let’s first make a brief overview of who is an Angel Investor & what makes a Startup.
Angel Investors are usually entrepreneurs whose business strategy is to invest in projects that are just at the beginning of their journey, & in exchange, they receive equity shares in the company. This, of course, includes part of the profit. Given that they become partial owners & initiators of the company with their capital, they are almost always very attached to it. This is what distinguishes them from investment companies, VC Funds or banks that usually come into the game after Angel Investors, after Startups have already shown results & it is easier to attract bigger capital.Since Angel Investors are mostly private individuals, each financier has his own specific motives & investment strategy.
Startups are business ventures intended to solve a specific problem & create a product in order to dominate & innovate the market and grow. They usually start with very high costs, needed to develop a new idea, & not so much revenue. Therefore, most Startups fail due to lack of funding at the very beginning. The good practice when looking for Investors is to do an extensive research on Investors you are trying to reach. As already mentioned, Angel Investors have different motives & personalities. Therefore, it is necessary to find the one who best suits the business venture. You can find Angel Investors, even in the circle of your close friends or relatives. Once you are just at the beginning it is common & efficient to start with searching Investors online.The passion of Startup founders is roughly equal to the passion with which Angel Investors invest their capital, & this is what makes them ideal partners.
Funding Startup business
The first step in finding funding for your Startup is reaching out & connecting with Investors. Most often, this is done via emails with ppt presentations, pitch decks & one pagers & papers handed out to Investors at different summits or conferences. The best & most effective way to start is to approach Investors via Startup websites for finding funding like PitchSee where you can, in just 2 min, which is the recommended length of the video pitch, present your project & all the passion you have invested in your project, in a very personal and creative way & that’s what Investors are looking for.After they find a common language, the Investor enters the business. According to Business News Daily most often, Investors get a 20 – 25% stake in the company. If the Investor is particularly interested, he/she can also enter the management structure. It’s always a good sign if an Angel Investor wants it. In this way, he/shw can better monitor the development of a business idea & offer advice or guidance. Since Investors are usually very experienced & capable businessmen, such a Startup has a very high probability of success.According to statistics Investors usually stay in the company 5 to 7 years but in rare cases they cash out after only a few years. Investing in a Startup is risky but if they succeed, the return on investment is worth it.It is a long-term relationship in which both parties will share the good & the bad.
What Angel Investors & Startups are looking for
Angel Investors are primarily looking for a solid & well-developed business model. In their pitches, the founders of the Startup should present commitment & professionalism, while in subsequent negotiations, it is necessary to show that the business model is sustainable. Well-done market research, competition analysis, a realistic presentation of income & expenses (if the product/service is on the market), as well as everything else that can prove that the business venture will succeed, are expected of them.On the other hand, it is not recommended for Startups to rush & accept the first Angel Investor they encounter. There has to be a certain amount of compatibility between them. The ideal Investor has extensive experience in the field covered by the Startup. If such a person chooses you for his/her investment project, it means that you are on the right track. Such an Investor can very well advise the founders & share knowledge. This is very important because Startups usually lack experience to compete with the competition. An experienced Investor can prevent some very common or even fatal mistakes in the beginning. Another thing that Angel Investors can help Startups with is connections. They are experienced Investors who have already gone through many projects, both successful & unsuccessful, & thus met a large number of useful people.If the Investor has concentrated his investment in only one niche or several similar ones, the connections he/she has acquired can be the difference between meteoric success or failure.