Things you should know about Angel Investors

Who is Angel Investor? In short, it is a person who invests his or her own money in a developing company. The term is becoming more and more popular as the number of angel investors is constantly growing. The reason of this increasing popularity lies in the people’s search for better returns than those they can receive from the traditional investments. Usually, such investors earn somewhere in between $60,000 and $100,000 so they are not necessarily millionaires as it is often thought.

Angel investors come from many various working groups, such as doctors, lawyers, suppliers etc. There is a fact which makes “angels” different from bankers and venture capitalists: they are motivated not only by the potential profit. What can be this other motivator? For example, their own belief in some idea or willingness to help young entrepreneurs who they think deserve such interest. Angel investors do not often demand control in return for their involvement. They take risk to obtain a part of the business they believe in.

There are two groups of angel investors:

  • Affiliated – this type of “angel” knows you and your business to some extent, but it does not mean he or she is acquainted or related with you.
  • Nonaffiliated – such angel investor knows neither you nor your business.

In general, it would be a good idea to start looking for investors among those affiliated – it is easier to create the business relationship with those who know you and are familiar with your business. While searching consider these groups of people who can be affiliated angels:

  • Professionals – this group includes people who provide service for you. These are for example: doctors, dentists, lawyers etc. Their income is usually high enough to find additional investment money, and even if they are not interested, they can ask their colleagues. Arranging a meeting should not be a problem in this case and talking to people you already know is much easier.
  • Business associates (people you keep in touch because of your business matters) such as:
    – suppliers
    – customers
    – employees
    – competitors

Then, there is the nonaffiliated category which consists of:

  • Professionals – those you do not personally know
  • Middle managers
  • Entrepreneurs – those who used to be or are successful in their businesses would be perfect investors especially if they know your industry

How to gain interest of the nonaffiliated investors?

  • Advertising – the most obvious way to get attention; try your local newspaper’s business opportunity section.
  • Business brokers – they know lots of people willing to buy businesses, you can try to ask for a few contact names even if you do not want to sell your company.
  • Telemarketing – You receive a list of some potential investors from your area and you can either call them yourself or just hire somebody to do it for you.
  • Networking – venture capital group meetings or other business meetings can be a great chance to get contacts you need. You can find a calendar with a list of such events in your local newspaper.
  • Intermediaries – these are companies which connect firms and angel investors. Their profit comes from a percentage of the amount they get for you.