Do you need an angel investor to raise private business capital?

Many startup businesses need funding in addition to what they already garnered from their family and friends.  But banks are generally hesitant to loan money to companies with little revenue, few customers, and almost no track record.  Government sponsored funding requires significant paperwork and lengths of time before the entrepreneur sees any money.  And other institutional investors like venture capital firms fund somewhat established companies with huge growth potentials in large market spaces.  So where can you turn to raise private business capital?

How can angels help?

An angel investor can provide the intermediate private capital that no other lenders are willing to give.  As a result, they want to have high potential rewards for their assumed risk.  Typically angel investors are wealthy individuals that provide between $10,000 and $1,000,000 to early stage companies across almost every industry.  They may require a 25% annual return on their capital or 10 times their money in a certain amount of time.  Usually they will not expect a full return until five to seven years after they make their investment.

Why do angel investors use their own private capital?

Many times they are exited entrepreneurs and retired businessmen that want to use their experience and contacts to help other entrepreneurs.  Some love the startup atmosphere and want to stay involved in a reduced role.  Others want to stay up to date on the latest developments in an industry or even live vicariously through an entrepreneur.  Regardless of the reason, it is important for you to find the motivation of your potential angel investor so that you can tailor your presentation to them and secure the necessary private business capital.

What do they prefer in a potential business investment?

Angel investors generally prefer to invest their private capital close to home to make it easier to leverage their knowledge and contacts.  Many times you need them as much for their advice and contacts as their money. 

They also prefer a clear exit strategy.  In the end, every angel investor uses his own private capital in order to generate a handsome return on the business investment.  When you can show them how you plan to give them that return, including the reasons for it, they will be more excited about investing in your business.

Many filter deals by industry and size of investment as well.  Most will invest primarily in industries in which they have experience.  In addition, they usually will invest within a certain range.  If your private business is not in their preferred industry or your necessary business capital is outside their range, you will probably be wasting your time pursuing the angel investor.  The caveat to this is if they cannot invest the amount of capital you need, you could possibly include them in a syndicate of angel investors with private capital.

Where can you find an angel investor?

The internet provides a wealth of resources to find angel investors.  In particular, www.goBIGnetwork.com has a large number of angel investors actively seeking businesses in which to investor private capital.  The Go BIG Network connects investors, entrepreneurs, job seekers, advisors, service providers, and anyone else in the startup community. 

The Go BIG Network

If you want to actively search for investors, you can purchase a subscription.  With a subscription you can view the contact information for all Go BIG members.  Using the Go BIG search function, you can find investors specifically targeted to your business based on industry, location, investment amount, etc.  When you find an investor that seems to be a good fit, you can contact them about your opportunity.

Alternatively, you can get a “Request.”  Your “Request” is a brief advertisement similar to a classified ad that is sent out to targeted investors.  This allows you to avoid the hassle of finding all the targeted investors in the first place and allows them to come to you instead.