Wednesday, June 23, 2021

ANGEL FINANCING: KEY OPTION FOR STARTUP FUNDING

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Angel investors are usually individuals who invest in start-up or early-stage businesses in return for an equity interest. Angel’s investment in startups has increased, and high-profile success stories like Uber, WhatsApp, and Facebook have spurred angel investors to make several bets hoping to make big profits.

Typical angel investment is $25,000 to $100,000 per company, but may be higher.

Here’s what the angels especially care about:

  • The standard, enthusiasm, dedication, and honesty of the founders;
  • The business opportunity being discussed and the potential for the company to become very large;
  • A clearly designed business strategy and any early signs of traction against the strategy;
  • Interested technologies or intellectual property
  • Acceptable valuation in fair terms (angel investors are investing at an early stage when the risk is greatest so that they generally need lower valuations to compensate)
  • The feasibility of collecting additional start-up funding rounds if progress is made

There are a variety of ways to find angel investors, including through:

  • Other entrepreneurs
  • Lawyers and accountants
  • Angel List
  • Angel investor networks
  • Venture capitalists and investment bankers
  • Crowdfunding sites like Kickstarter and Indiegogo

A good introduction from a colleague or an angel friend is the perfect way to meet an angel investor. Use LinkedIn to decide which connexons you might already have. Angel investors are often more likely to invest if they know your business well, so it also helps to get started with your contacts in that business.

Serial entrepreneurs with profitable past liquidity events are also some of the best angel investors— they have the cash to invest, but they also bring other essential advantages to start-up partnerships, such as:

  • Contacts to venture capitalists
  • Contacts to strategic partners
  • Advice and counsel
  • Credibility by being associated with the investor
  • Contacts to potential customers
  • Contacts to potential employees
  • Contacts with lawyers, banks, accountants, and investment bankers
  • Knowledge of the marketplace and strategies of similar companies
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