How to Find Angel Investors: A Guide for Entrepreneurs
Here's your comprehensive guide on how to find the right angel investors, from initial research to follow-up.
5 min.
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Getting the startup capital you need to help your business grow is one of the most difficult aspects of being a founder. This article will provide guidance on how to find investors for your startup. At the end, you can also view our big list of startup investors.
Why? There are a couple of factors at play:
Despite these challenges, there’s never been a better time to build a company. Technology is cheap, and access to the global economy means that finding talent is affordable, too. New capital providers crop up every day. Plus, there are more resources and guidance available to founders than ever before. So let’s jump into one of those resources: how to find investors.
First, what kind of business do you want to build, and what type of lifestyle are you willing to sacrifice for it? This point is worth spending a lot of time thinking about.
If you want to raise VC dollars, be prepared for hyper-growth and a ticking clock called “runway”; this refers to how many months you have until you run out of cash.
Many people start out thinking they want to build a billion-dollar unicorn. But for all the glitz, this is a difficult, isolating path with only a slim chance of success. What if you built a bootstrapped software business generating $100-200k in net profit? Would that give you a comfortable life and much less stress?
You’re the only one who can answer this question for yourself. It’s important to start here, not least because how you want to build will impact the capital options available to you.
Let’s start with a simple list of different capital options available to you:
The reality is, you have a lot of options when it comes to securing capital for your business - some traditional, and others more innovative. This glossary by the author of Adventure Finance is also helpful. Last year, we wrote about how to raise pre-seed and seed stage funding that may also provide a little more detail into specific options for very early stage startups.
Factors like the stage of your business, the growth potential of your company, and your actual offering will determine which types of capital are available to you. In addition, your own preferences and expectations will also influence your selections. There are pros and cons to each startup funding option you explore; it's important to consider your path deeply.
Now that you have a short list of types of capital options that you’re interested in, you’re ready to start identifying organizations in that space that invest in businesses like yours.
For example, some VC providers only invest at the earliest stages, while others won’t come in before Series B. Certain grants are only eligible to female-founded businesses. The list goes on.
The process of building your short list of investors relies mostly on your own research. We’ve tried to make it a little easier with this list of startup capital options and providers:
Access this list of startup capital options here. We’ll keep updating it as we find additional resources.
Now that you know what types of capital you’re interested in, and have a list of potential capital providers, it’s time to start getting your materials ready.
Chances are, you already have a pitch deck or a business plan in place. Now is the time to review those materials, and make sure that they reflect your business and speak to the unique goals of your potential capital providers.
While you don’t need to recreate your pitch deck for every investor, it is helpful to tailor your messaging to each unique potential investor or capital partner.
Now it’s time to start talking to your target financial partners. Now, if you’re seeking bank funding, your path will be a little different. But if you’re seeking capital from individuals or a firm, you’re likely to be having a direct, personal conversation. Raising from friends and family can be a bit more casual, while raising from institutions like VCs, need to be pre-planned and executed according to best practices.
Popular wisdom will say that founders need to have a “warm intro” to a potential investor or capital provider. This isn’t wrong - but it’s not the only way. If you have strong connections with angel investors or other potential capital providers, absolutely have those conversations.
But if you don’t have connections, don’t get discouraged yet. There are lots of different capital providers that are open to cold intros, and even a few that offer an open application process. Social media, especially Twitter, is an excellent place to start looking. Lists of angel investors pop up all the time.
This process of finding the right capital option will most likely take a few months.
Now that you have one or more options, it’s important to make sure you’re aware of the implications of each choice, personally and for your business.
Before signing anything, it’s a good idea to have a lawyer take a look at the agreement to make sure you’re aware of the implications. You may also need to seek an expert with a financial background, if that’s not your long suit.
Now that you’ve raised capital, it’s time to put it to work! Depending on your business, that could look like a lot of different things: hiring, building product, marketing, sales…the list goes on. (Or, if you’re like most founders, all of the above.) You may also have different requirements or obligations based on your investor or capital provider.
Here at Chisos, we strongly believe in making startup capital more accessible. After all, entrepreneurship is the backbone of the economy, and entrepreneurship is a powerful force for positive social and economic impact.
That’s why we offer a completely open application and fund founders as early as day one. By investing directly into individuals, we’re able to unlock capital at the earliest stages, and fuel entrepreneurship.
