Tips For Finding Angel Investors

Seeking capital for a new or start up business? Angel investors may be just the thing you're looking for to implement a strong business plan. Angel investor financing is an alternative to personal business financing, bank business loans and venture capital. Typically, angel investors are wealthy individuals who seek out business related investment opportunities with potential for high growth. Angel investors don't just lend money to anyone as a true angel might, but usually discern what to invest in based on a number of criteria. Some of these criteria are listed below:

• Industry specific businesses ex-New technology

• Sound business plan and model

• Effective managerial team

• Innovative and knowledgeable business participants

• Credible and capable fund seekers

• Potential for growth i.e. Return on Investment (ROI)

Where to find angel investors 

Angel investors can be found through specific venues and sources. Some of these sources may charge a fee to help match businesses with investors whereas other venues may have a direct application procedure. A few sources for finding angel investors include start up company networks, angel investment fund organizers, and government equity financing. There is a great deal of money available from these and other sources and finding these sources is relatively easy. Additional resources for finding angel investors include the following:

• Angel investor facilitation services

• Investment seminar networking

• Business networking groups

• Angel investor groups and organizations

• Lawyers who work with angel investors and/or prepare capitalization documents

• Business classified sections of financial newspapers

What angel investors look for

Since angel investors are placing their capital in unproven businesses, they may invest through limited liability corporations (LLC's), trusts or non-partnerships so as to protect their personal/non-investment assets from liability should their investment ventures fail. Angel investors are look for ways to grow their money not lose it. This means the businesses they invest in should be able to return a sizeable yield on investment. What's more, depending on whether the angel investor belongs to a group or fund of angel investors, the procedure for acquiring capital may vary.

In some cases applications similar to business loan applications may be utilized to obtain funding while in other cases, an angel investor may agree to finance after having reviewed the business plan and ideas personally. Since angel investing is a unique form of financing less subject to banking regulation, the criteria and rules for obtaining angel investment funds can be diverse. Angel investors are located in many cities and contribute to the liquidity of a business and growth driven economy. If an business person has created one or more successful businesses in the past and is seeking financing for a second or third time, the process of obtaining equity capital may be easier due to 1) familiarity with the process, 2) connections within the investment community and 3) a proven track record of business success.

Angel investors don't just give money away, they seek a financial instrument as collateral for investment. Such financial instruments may include convertible bonds, common stock, preferred stock or revenue and/or earnings sharing mechanisms. The financing terms are detailed in financial contracts, share structure documentation and/or debt issue instruments such as indentures and debentures. In any case, few angel investors are likely to simply give money away to non-charitable causes and/or businesses that have an estimated high chance of failure.

Summary 

Finding angel investors is the process by which new businesses obtain capital in exchange for a stake in the future earnings and/or revenue of those businesses. Angel investors can be located through a number of means and sources including physical networking at investor events, known angel investor collaborators, angel investor organizations or funds, and the angel investors themselves.

The search for angel investors is a process in and of itself but may only be fruitful if the fund seeker(s) have a viable and competitive business plan for the use of the angel investor's funds and are willing to share in the potential growth of the company in which the angel investor invests. This article has illustrated the concept of angle investing in addition to the various sources at which angel investors can be found in addition to what angel investors may look for when financing with their money.

Sources:

1. http://www.smallbusinessnotes.com/financing/angelinvestors.html
2. http://www.gobignetwork.com/http://fmangelfund.angelgroups.net/
3. http://www.angelcapitalassociation.org/
4. http://www.sba.gov/services/financialassistance/equitycapital/index.html