Known as business angels in Europe, angel investors provide start up capital or expansion funds for a business or entrepreneurial venture. Usually one person or a team of investors, angel investors require a higher-than-normal rate of return in comparison to a bank or other formal lending situation.
What Do Angel Investors Do?
Many angel investors are business-savvy folks or entrepreneurs themselves looking to invest in an up-and-coming enterprise without taking on the full responsibility of business ownership. Most (but not all) require some input into how they are investing into runs. For this reason, its important for business owners to vet angel investors well, because not only will they provide your venture with money, but they'll want to have a say on how things are run as well.
How Much Money Can an Angel Investor Offer?
Angel investors are often seen as a resource for entrepreneurs that can't raise enough capital through friends and family, yet still require more money to get their business off the ground. Therefore, most angel investors offer funding in the range of $150,000 to $1,000,000, depending on a variety of factors. In the US, the average amount raised through angel investors was $307,000 in 2009 according to the Boston Globe.
What are Angel Investors Looking For?
Angel investors are looking for strong business ideas and entrepreneurs that can prove they are a solid investment. Make sure you have all of the following bits and pieces covered (and available to any angel investor that shows interest), and you'll have a better chance at success:
- Positive cash flow that shows the potential for long term rewards
- Experienced and knowledgeable management;
- Sound business plan that covers more than just the basics;
- Easy investment set up (which usually means sole proprietorship);
- Opportunity for involvement with the business; and
- Exit strategy planning in place.
How Do I Find an Angel Investor?
Many entrepreneurs find that angel investors come to them when they're ready to expand their business, or after they've won an award or community accolades. For startups or fledgling businesses however, networking might offer more viable options, such as your local Chamber of Commerce, business networking groups, or angel investor websites in your area. Also, many angel investors these days choose to take part in networking groups of their own; try your local Community Futures office in Canada or SOCAN in the US for ideas and contacts to find these people.
References:
- (2010, March 31). Angel investor report a mixed bag. Boston Globe.
Bonny Albo - Bonny offers 20 years of writing experience to her readers. CNN, MSNBC, The LA Times and Macleans all reference her for expert advice.
