Do you need to find an angel investor web site?

More than $23 billion was invested by angel investors in 2005.  Because of this, it would be easy to think that funding has become easy to obtain.  Any entrepreneur with some experience raising capital will tell you this is not the case. 

Where can I find angel investors?

One way to find angel investors is by searching for angel investor networks and groups on the internet.  There is an angel investor web site for almost every group or association of angels.  A web site with a directory of these networks will usually allow you to search based on location of the angel group.  There are several other criteria that are also important to most every angel investor.  Not only do they typically invest close to home, they also tend to invest only in industries with which they have previous experience or familiarity.

The Invstor.com Network web site, www.Invstor.com, allows entrepreneurs to connect with angel investors using several different methods.  It is not exclusively an angel investor web site though.  With a subscription you can get the contact information for any member on the network, including job seekers, investors, advisors and any others involved in the startup community.  A subscription requires you to be proactive to get results.  Alternatively, you can post a “Request” for funding, which gets broadcasted to targeted investors on the network.  It is similar in concept to a classified advertisement.  If neither of these seems appealing, you can sign up for a free membership and create a profile with the essential details of your business.  This will allow investors who are browsing profiles to find you.

Another way to find the majority of angel investors that are not running a web site is through your personal contacts.  If you do not know any angels personally, inform your acquaintances that you are looking for investors.  Meet people and tell them about your business whenever you can.  Many times helpful ideas and contacts come from unexpected places.  It is helpful to recognize that most angels choose deals referred to them by friends in order to control their deal flow quality.  However, more than two degrees of separation between you and the investor provides you little advantage since you will still appear to be relatively unknown to the angel.

I found an angel.  Now what?

You need to be well prepared before presenting your business to an investor.  Startup companies are high risk investments, and to minimize that risk investors want to see that you have thought of many of the details and have a solid plan to become profitable quickly. 

One thing you need to consider is how your product or service can be differentiated from everyone else.  If you do not have serious competition currently, you will eventually.  If not, then your market space may not be large enough to warrant large investment sums.

In addition, you should show an investor that you have an executive team with a proven track record of getting things accomplished quickly and efficiently.  Some investors consider this the most important piece of the puzzle.  The owners should be passionate and hard working.  If you have connected a high percentage of personal liability to the business, i.e. “you have skin in the game,” investors will be convinced that you are dedicated to the success of the company.

You must also have a well-defined exit strategy.  Investors want to have a grasp of what their return might be.  An exit strategy will also help to clarify decisions that would have otherwise been difficult.  Investors typically collect their return through acquisitions, going public (IPO), or through buying back equity.

If your company has already generated revenue, solid and repeatable success in the limited trial runs can be a key selling point to an investor.  A prototype or demonstration can also give investors a better comprehension of your business and increase the chances that they will agree it is a good idea.

 Finally, you should try to remain flexible in the amount of control you want over the company.  You will have to give up equity in almost every case, and some investors will want further decision making privileges as well.  Be clear in your negotiations about both your role and the role of the investor in the decision making process.  This will establish clear boundaries and potentially prevent future disputes.