Hasn’t enough capital is the main reason to try to find a angel investors, but do you know how to do it?

What is an angel investor?

Angel investors are typically high net worth individuals who invest very early into the formation of a new startup company, usually in exchange for convertible debt or equity. The role of angel investors serves as a critical bridge between the startup financing needs of a company and their larger capital needs later on.

Who can be angel investors?

In order to be an angel investor, a person does not have to be an accredited investor. However, a lot of angel investors are accredited investors.

In order to be an accredited investor, according to the Securities Exchange Commission (SEC), a person must:

  • Have made at least $200,000 a year (or $300,000, for a couple) for the past two years and must have the expectation of making that amount again or
  • Have a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence)

How to find angel investors?

Look Close to Home

Because so many angel investors like to play an active role in the business they invest in, they prefer to invest in businesses that are close to home. “An angel wants to be nearby so they can drive over to talk to the principals,” says Jim Orgill, managing director of advanced technologies for the Business Development Bank of Canada.

Friends and family

A good first place to start is your own friends and family. Are there high net worth people in your personal networks who are already investing in startups? A warm connection is always to your advantage when you’re startup fundraising, as most people are more willing to invest in people that they know than in those they don’t.

So ask around.

You might be surprised to find an uncle who’s looking to invest or a cousin who just came into some money and is looking for something to do with it.

Network, Network, Network

In most cases, you need to be referred to an angel investor. They’re not hanging out on the street waiting to talk to whoever comes by. So to find angel investors you need to get to know the right person (the one who can refer you to the angel investor you’re looking for), which means immersing yourself in your local business and social community.

Online platforms

Recent years have also seen a mini explosion of online platforms for angel investors. Angel Capital Association is one, with more than 13,000 accredited angel investors. Each site is going to have its own requirements and expectations for connecting with angels, however, so pay attention to the rules and processes outlined on their sites.

source: startups.com

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