How to find an Angel Investor
Approaching affiliated angels (contacts you know) is simply a matter of phoning to make an appointment. To look for non-affiliated angels (individuals not already known to you), try these proven methods:
1. Advertising.
The business opportunity section of your local newspaper or financial magazine is an excellent place to advertise for investors. Classified advertising is inexpensive, simple, quick and effective.
2. Business brokers.
Business brokers know hundreds of people with money who are interested in buying businesses. Even though you don’t want to sell your business, you may be willing to sell part of it. Since many brokers aren’t open to the idea of their clients buying just part of a business, you may have to use some persuasion to get the broker to give you contact names. You’ll find a list of local business brokers in the Yellow Pages under “Business Brokers.”
3. Telemarketing.
This approach has been called “dialling for dollars”. Firstly, you get a list of wealthy individuals in your area. Then you begin calling them. Obviously, you have to be highly motivated to try this approach, and a good list is your most important tool. Look up mailing-list brokers in the Yellow Pages. If you don’t feel comfortable making cold calls yourself, you can always hire someone to do it for you.
4. Networking.
Attending local venture capital group meetings and other business associations to make contacts is a time-consuming approach but can be effective. Most business newspapers contain an events calendar that lists when and where these types of meetings take place.
5. Intermediaries.
These are firms that find angels for entrepreneurial companies. They are usually called “boutique investment bankers”. This means they are small firms that focus primarily on small financing deals. These firms typically charge a percentage of the amount of money they raise for you. Ask your lawyer or accountant for the name of a reputable firm in your area.
Angels tend to find most of their investment opportunities through friends and business associates, so whatever method you use to search for angels, it’s also important to spread the word. Tell your professional advisors and people you meet at networking events, or anyone who could be a good source of referrals, that you’re looking for investment capital. You never know the types of people they know.
Joining an angel investment matchmaking online network
It is probably better to register with a local network, as it is easier to do a background check on the site and obtain references regarding possible investors.
Local vs. International Network
Using a local network makes dealing with possible investors so much easier. It is important to be able to meet them face-to-face and they too will appreciate meeting the person to whom they are lending their hard-earned money.
Why is a registration fee necessary?
Charging a registration fee works as a quality filter. This means that the network will only attract those that are serious about finding investors and hopefully filter out those who are not serious. However, there are people out there who will claim to have good contacts in the angel community and charge hefty fees up-front and then don’t deliver; this is why it is important to register with a network that has a code of ethics. If they offer a refund or guarantee of some kind, even better. Most, however, have terms and conditions that you must read carefully and understand before registering.
Do your own investigation before paying a registration fee
You can visit http://www.whois.co.za for background check to find contact details for the owner of the website.
- Contact the network and request references from other users.
- Do an Internet search and see if there have been any complaints.
DIY angel networking
You do not have to sign up with a network. Angel investors can be people you know, or do not know. Those you know might form part of your business network e.g. suppliers, employees, customers. Those you don’t know can be made up of professionals, managers in the corporate world, bored with their jobs who want to invest in something new.
How to protect a business idea before pitching it to an “angel investor”
Entrepreneurs are often in a tricky situation when presenting their business plans and intellectual property (IP) to potential investors. On one hand you need to play open cards in presenting your idea and business plan, on the other hand you are nervous about giving too much of the game away for fear that an unethical investor may steal your idea. The best way to protect your intellectual property is to ask the investor to sign a Non-disclosure Document.
