How Startups Can Attract Angel Investors
As a startup, one of your biggest challenges is finding angel investors and raising money to fund your business. It's not easy to get individuals to invest their own money in something new, or something that still needs to be tested and proven. How do you get them to trust and have faith in you and in your startup when you still don't have anything to show for it?
It is important to understand why angel investors invest in startups in the first place. Understanding the logic behind their decision would help you focus your pitch on things that resonate with your prospects.
The main reasons why angel investors decide to invest in startups are the following:
- A considerable opportunity. You have a good chance of securing their investment if you can demonstrate that your startup found an addressable market that it can take advantage of and that can produce lucrative results.
- A highly competent management team. Talk about your team and the people driving your startup. Talk about how equipped they are at propelling the business forward and leading it to success.
- The scalability of the business. Investors want signs that there will be a strong return on their investment. Will a considerable number of customers pay full price for your product or service? Present numbers that will support your startup's immense potential for sales growth on small incremental costs.
- Solid business model. Present how your startup is built on a solid and realistic business model and show the methodology with which it will achieve its objectives.
- Encouraging and feasible numbers. Talk about figures and show them how feasible and attainable the projected numbers are. Back your calculations with detailed research and reliable data.
- Momentum of the business. Show potential investors that things are already in motion and that your products or services are also making traction. Is your product already out in the market and are customers actually buying them? Are you set to launch your business and is there significant interest around it?
- Trends and timing. Whether or not you or your potential investors believe that there's a good and bad time to start a business, show them that it's the perfect timing for your startup. Talk about trends and economic conditions and how these play a role in the timeline of your business.
- Chances to diversify. Investors love having diverse investments and assets. So, show them how having an interest in your business would give them a more diverse portfolio.
- Chance to make a difference. Investors want to support projects that have a positive impact on the environment or the social climate. So present how this will give them the chance to do impact investing and make a difference.
- Potential payback. Show investors how investing in your startup would pay off and how it would give them great returns at the end of the day.
Here are more tips on how your startup can attract more angel investors:
- Know your industry. Learn all you can about the industry you're entering through your startup.
- Network. Go to business mixers, conferences, and other events so you could meet people. The more people you know, the more potential investors you could
- Be an expert on your business plan. Know your business plan inside-out so you could answer all questions about your business.
- Start with family and friends. Allow your family and friends to invest in your business first. If there are people who have faith in you, it should be them.
- Pick the right investor. Pick good investors whom you believe in and whom you can actually see yourself working with as a partner.
- Sell yourself. Show your investor that you are the perfect person for the job.
Remember that raising capital by approaching angel investors and asking them to trust you is a very difficult process. You'll get more rejections than investments. And it can be shattering. So, keep in mind that the real secret to all of this is persistence.