6. Angel Investing
Angel investors are typically wealthy professionals who are able to offer you start-up capital in exchange for equity in your business or a fixed percentage interest on the loan. Angel investors can be individuals or form part of an angel network.
Angel investors can have different expectations. There are those that are happy to be hands-off, a silent partner, while there are others who want to be involved in the decision-making process and could act as a business mentor.
How to attract investors
“Know who you’re pitching to. You need to know what your potential investors are looking for specifically. What sort of ROI are they looking for? What kind of horizon do they have in mind?” advises Modise.
Regardless of who you’re approaching she says, you need to do your research and know what attracts them. “If you approach the wrong kind of investor, you’re just wasting your time.”
There are a few things that angel investors are looking for when listening to your pitch, namely if you have the right personality traits that make successful entrepreneurs and if you’ve perfected the elevator pitch. You can read Darlene Menzies, founder of Finfindeasy.co.za, story and how she became the successful recipient of multiple rounds of funding, and what she wished she knew the first time she pitched her business to investors.
There are also behavioural red flags and mistakes that will scare off investors. Some examples are:
- Making unrealistic market size claims
- Failing to respect your competition
- Generating unrealistic financial projections
- Lack of a professional business plan (no notes on the back of a napkin or 100-page novels)
- Presenting unrealistic financial projections.