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How To Find The Right Angel Investors For Your Startup Business
Angel investors (not venture capital firms) are the most likely candidates to get your businesses from a piece of paper to a proof-of-concept. These angel investors typically come in four distinct groups:
Friends and Family
Friends and family investors have their distinct plusses and minuses. The plusses are these people know you the best, so they are the closest to you in determining whether or not you are backable, as first hand references. The minuses are pretty major: these are your friends and family! It is very difficult to mix personal and professional relationships. If you decide to ultimately go down this road, make sure your friends and family know this investment is HIGHLY risky, and they should not invest the funds unless they are prepared to lose 100% of their investment (e.g., like money they would gamble in a casino).
Individual Angel Investors
As for finding angel investors directly, this is the hardest route, by far. First, because they prefer to stay anonymous. And, second, because they don't know you at all. Sometimes rich individuals have built formal family investment offices, with professional managers screening deals for them. But, they prefer to invest $5MM+ in more typical venture investments, not $500K for a startup. Preferably, you need to find an individual that understands your industry and business model and can bring real value to the table. If they have first hand experience in your space, and they think they can help you accelerate your efforts, it is easier for them to get over the investment hurdle. So, identify those individuals, and try to figure out someone they know, who can credibly make an introduction for you.
Venture capital firms are also aware of key angels in their market, so reach out to them for guidance. Angel List is a particularly good resource that makes finding angels for your region/industry easier than ever, so check them out as a good place to start. But, again, look for credible relationships to help open the door for you, preferably to investor is your home market (as most angels tend to bias local investments).
Angel Investor Networks
Like the family offices, investors set aside funds for angel investments, screened by a professional team that sources deals for the network. So, the individual angel gets to keep their anonymity and have the comfort of a team of smart managers doing due diligence on investment targets, on their behalf. Instead of one angel investing $1MM by themselves, 100 angels aggregate $100MM and invest as a group in the deals they like the best, individually or collectively. And, on the flipside, it is much easier for you to raise your full amount needed, with one phone call, instead of calling the numerous investors individually.
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