Are you looking for an angel capital investor?

Many entrepreneurs begin financing their startup businesses with investment from family, friends, and any acquaintances they can convince to provide some funding.  After these initial sources of funding, the process gets more complicated. 

Who should actively seek an angel capital investor?

If you are looking for less than one million dollars in capital, an angel investor will probably be your best option because of the flexibility and expertise many angels provide.  

Other options include banks, government loans and grants, and small venture capital firms.  Each of these has glaring drawbacks.  Government funding many times requires a significant length of time to secure funds along with substantial time and money in the application process.  Banks often view startup ventures as too risky, and thus relatively few small businesses are funded primarily through them.  Venture capitalists at a small firm will occasionally provide as little as $1 million, but they tend to be more rigid in their expectations of deal structure and terms than angel capital investors.

Where can you find angel capital investors? 

Your personal network of contacts is probably the most important method of obtaining capital from an angel investor.  The popular saying “it is not what you know, but who you know” holds true the majority of the time in securing funding.  If you do not personally know an angel capital investor, you can still make progress by letting others know your business ideas and your intention of finding the financing through angel investment.  However, you should try to keep no more than two degrees of separation between you and the angel investor.  This way you will avoid the appearance of “cold calling” an investor.  Most angel capital investors get their deal flow through a select number of friends.  Because of the trust they have established with these friends, they can filter out other deals much more quickly. 

Another source of for finding capital from angel investors is the internet.  Angel networks and directories of angel groups can be found with a quick search. 

How can you maximize your chances of getting angel capital?

Many angel capital investors have strong preferences for a particular industry when searching for a deal in which to invest.  Most people will not invest in an area with which they are not familiar.  Thus the first criterion in your search for a suitable angel investor is to find those that invest in your industry. 

Second, angel investors generally provide a similar amount of funding for each deal.  If you are seeking much more money than they typically put in a deal, you may be wasting your time even if they seem interested.  It may be better to raise the necessary funding from a syndicate of angel capital investors or an angel group.

Third, most angels will only invest close to home.  This allows communication to be unhindered as much as possible.

Fortunately, you can find individual angel capital investors based on those three criteria at www.Invstor.com.  The Invstor.com Network is an online marketplace connecting job seekers, investors, advisors, and startup companies.  Membership is free, and with a subscription you will have the ability to view the contact information for a large number of investors.  Alternatively, you can post a “Request” which allows you to broadcast a message (this could be your business idea with contact information) to a targeted group of investors based on your industry, amount of funding needed, and location.  

What motivates angels to invest and why should it matter to you?

Angel investors are motivated by many different things.  Some invest purely for the potential financial gains.  Most have additional and significant other reasons as well.  Some people fall in love with your business idea and want to see it succeed.  Others want to use their personal contacts and experience again.  Still others want to stay up to date on the latest developments in specific industry while taking an advisory role. 

The reason it is important for you to discover the motivation of an angel investor is because their expectations determine the amount of decision-making they will want if they decide to fund your company.  Some may want a seat on the board or a coaching position while others want to be involved in daily decision making.

You should be clear on both your role and the role of the investor prior to accepting funding.  This can solve future problems and help everyone breathe more easily knowing what is expected of them.