Where can you find cash from an angel investor?

The internet provides an excellent avenue for you to begin your search for cash from angel investors.  Many of the angel investor organizations have a presence online.  These can be found through simple search engine query.  You will want to categorize your results to fit your specific needs.  In particular, you need to find groups that invest in your industry, are close geographically and have a typical investment range that includes the amount of funding you are seeking.  The reason you need such a limited set of investors is that angels typically do not provide cash unless these minimum criteria are met. 

Many angels have previous business or entrepreneurial experience but are not comfortable investing cash outside their former industries.   They want their investments to be close to home so that communication remains unhindered and changes can be made quickly if necessary.  You may be able to convince an investor to change their typical amount of investment for the right opportunity.  Angel groups sometimes pool their resources in order to do a deal larger than any one investor would typically do.

Where else can I find an angel investor?

However, the contact information for individual angels is more difficult to find.  Most angel investors do not want to distribute their information widely because they want opportunities from sources they trust.  If you do not know any angel investors, then you need to begin letting your network know that you are actively seeking an angel.  In addition, professionals like accountants, attorneys, bankers, and others may be able to refer you to angel investors.  Industry associations relevant to your business may also provide more people that can refer you to an angel.  Even your local chamber of commerce sometimes can point you in the right direction.  If possible, try not to have more than two degrees of separation between you and your potential investor.  More distance than this feels like cold calling to an angel.

Because contacting individual angels can be difficult without extensive personal contacts, another resource for finding cash from angel investors has been developed.  It can be found at www.Invstor.com.  The Invstor.com Network allows you to connect with investors primarily in two ways.  First you can get a subscription which allows you to view the contact information for any of the thousands of investors that are members.  You can even customize your search based on geography, industry, and preferred funding amount.

Alternately you can post a “Request” on the network announcing your desired type of investment.  A Request is very similar in concept to a classified advertisement.  Investors browse these ads when they are searching for deals.

A slower but less expensive way to get funding is to simply create a quick profile of your company which will allow you to indicate that you are looking for funding.  It is simple and free.  That way if investors are looking through profiles of companies they can see your idea and contact you if they are interested.

What are the typical sources of cash for startups?

Many times cash from angel investors is in greater demand when venture capital or other traditional funding sources are unable or unwilling to provide financing for a company.  Creative entrepreneurs many times have structured deals with private investors so that funding comes in a form similar to a loan.  Using the loan to float them through rough periods may be all that is necessary.  Companies with a large growth potential or urgent cash needs may not be able to use that strategy.

Initial funding is usually done through the entrepreneur and his family and friends.  After this, banks or government loans and grants are sometimes viable options.  However, these may require significant lengths of time before funding is granted.  Angel investing and venture capital are the other large sources of funding for companies before an acquisition or initial public offering.

Does my business have to be large to attract angel investor cash?

Most serious angel investors realize that startups are high risk, and therefore they are looking for a high return.  Most home based businesses and businesses that are not meant to get large will not achieve the type of returns that angels are seeking.  Though it varies by investor, it is not uncommon for an angel to require a 25% return annually over the course of five to seven years.  Others may specify a return in terms of IRR, such as 10 times their money within seven years.  If you have a small home based business you may have the greatest success funding it through family and friends.