After exhausting your friends and family—and your personal bank account—you may choose to approach angel investors for the next round of funding. Angel investors can either be individuals or groups. They invest far smaller amounts than what you’d expect from a VC, but the range varies wildly. You can expect investments from a few thousand bucks to more than $500K.
In the best cases, angels have critical insider industry experience (at the very least, you can hope they possess a passion for your industry), and they may evolve into a valued mentor or advisor. And, in return for doling out the cash, angel investors expect a hefty percentage of equity (think 5-50%).
So, just how do you find the right angel investors, and how do you approach them in such a way that you’ll get noticed? Follow these tips from entrepreneurs across the U.S. on how to handle the relationship.
1. Come prepared with a pitch deck.
These days a lot of people say you don’t need a traditional business plan. But you do need a pitch deck—and a pitch deck is a business plan, boiled down into simplified, persuasive presentation slides. But don’t think that you can just casually whip up 10 to 20 slides. It’s absolutely critical that you think through key elements of your business, and consider how you’ll address some tough questions.
“This is a must. You need to align the basic principles of market size, approach, timelines, budget, plan, etc. Without answering some of these basic questions it looks like you just put together a weekend project,” said Nick Santora, CEO of Curricula, an Atlanta-based startup.
2. Look for personal connections.
“I found that the best way to reach out to angel investors is to ask someone you know in common to give a warm introduction. If that is not an option, reach out to investors that are interested in your space. Find their email and reach out with a personal note,” explained Alex Zatarain, co-founder at Eight, a sleep tech startup funded by Y Combinator, Stanford University, Cota Capital, Comcast and others.
It’s worth the work to find a personal link to an investor, Alex stressed. “I’d advise to stay away from LinkedIn messages. Investors appreciate when you take the time to find someone to introduce you to them, or to find their email.”
3. Build rapport.
Olivier Plante, CEO of Thingthing, a London startup and creator of a free alternative iOS keyboard, recently received $400K in seed funding. Olivier stressed that you need to be extremely strategic in your overall approach. This includes trying to quickly build rapport, and doing plenty of research on the angel investor ahead of time.
“Make a human connection, quickly,” he said. “Just like a VC, they are also investing in you, not just your business. And, do your research on them. It’s important to know their experience and expertise, so you don’t waste time (yours and theirs) talking about what they already know.”
4. Don’t let a lack of experience slow you down.
“You don’t have to be an industry expert to become an industry leader,” said Robin Smith, CEO of WeGoLook, a tech platform designed to help people quickly find inspectors. “Get out there and make it happen. I was apprehensive to pitch to the angel groups, but did not let my lack of confidence get in the way. I knew I had to make that leap and just go for it.”
Robin bootstrapped the company for several years. She then presented to two angel groups and raised $1.2 million in angel investment.
5. Remember, it’s all just business.
Pitching your business (your baby!) is emotional. There’s no way around that. Your business is your heart and soul. However, remember to not take things personally. You will win some, you lose some. You’re not going to impress every investor; and not every investor is going to grasp the excitement of your startup, or “get” your value proposition.
“Don’t argue with prospective investors. Don’t be defensive. This is something I’ve witnessed and it floors me,” said Stephanie Sprangers, CEO and founder of Glamhive, a style community where members can earn cash-back by sharing looks and shopping with hundred of retailers. “Don’t take it (too) personal. It’s pretty hard not to, but it’s truly a numbers game.”
Stephanie pitched her startup idea to the Seattle Angel Conference in 2015, beating 45 other startups in the competition.