Angel Investors: Your Guide to Securing Funding for Your Business

Angel investors, also known as private investors, are affluent individuals who provide capital to startups at an early stage. In return for their investment, they receive equity or a share of the ownership in the company. The term “angel” comes from the fact that these investors take a chance on fledgling businesses, providing them with the financial support they need to get off the ground.

One of the key distinguishing features of angel investing is that it typically occurs very early in the life of a startup. This means that angel investors are often investing in a company before it has generated any revenue or proven its market viability. As a result, angel investors are taking on a significant amount of risk, with no guarantee of a return on their investment.

Despite this risk, many angel investors are drawn to the potential rewards of investing in early-stage startups. By providing financial support at a critical juncture in a company’s growth, angel investors can help to fuel innovation and entrepreneurship, while also potentially earning significant returns on their investment.

In this blog post, we’ll dive deeper into the world of angel investing, exploring how it works, why it’s important, and what you need to know if you’re considering becoming an angel investor or seeking funding from one. Whether you’re an entrepreneur looking to raise capital or an investor looking for new opportunities, this guide has got you covered. So let’s get started.

What’s the difference between angel investors and venture capitalists?

In the world of business funding, you’ll also hear a lot about venture capitalists. A venture capitalist (VC) is another type of investor, one that has a lot in common with angel investors.

But there are some differences between the two that business owners should be aware of.

Angel investors:

• Invest their personal money in a business
• Invest in businesses in their beginning stages
• Invest more modest amounts of money, with the median deal size from an angel investor coming in at $1.2 million in 2020

Venture capitalists:

• Invest money from other companies and partners (which is why they’re often known as venture capital firms)
• Invest in proven businesses that are rapidly growing
• Invest larger sums of money: early VCs invested a median of $4.5 million, and later VCs invested a median of $9.9 million in 2020

What’s an angel investor group?

You might also come across an angel investor group or an angel network. This is a group of angel investors who work together to evaluate and potentially even invest in startups as a whole, rather than as individuals.

They typically target their efforts by focusing on startups within a specific industry (like real estate or healthcare) or a geographic region. However, this isn’t a requirement.

4 places to Look for angel investors

Angel investing can be a great way to raise funds for your new business, while also gaining helpful expertise and guidance as you tackle entrepreneurship.

But you probably don’t know too many people who have millions (or even thousands) of dollars on hand to funnel into your business. That raises this question: How do you find angel investors? Here are four outlets to try.

1. Your existing network

Technically speaking, a friends and family fundraising round is entirely separate from raising money from angel investors. It usually happens first (before you ever approach other investors).

Even if you don’t ask your uncle or your neighbor for business investment, it can be helpful to ask them about their own networks. You never know who they’re connected to, and they might be able to introduce you to someone who enjoys financially supporting new or local businesses.

TIP: Talking about money with your loved ones can feel uncomfortable. Keep things low pressure by offering them an easy “out.” Something as simple as, “No pressure either way!” can help alleviate the discomfort of asking for introductions or financial support.

2. Business networks and organizations

You don’t need to be limited by your existing network as you seek funding—growing your network is a key piece of the process, too.

See if there are any industry-relevant professional groups and networks online or even in your local area. Connecting with those business owners can give you some insider insight into what angel investors other people have connected with. Try a simple internet search for something like “[your industry] networking groups [your city, state]” to see what comes up.

You can also find a SCORE mentor (run through the U.S. Small Business Administration or SBA) to get business advice from an established expert. Often, mentors might also be able to offer connections or introductions to potential investors.

3. Designated platforms

You don’t need to be in Silicon Valley to find angel investors. Today, there are a number of online platforms and tools that give entrepreneurs access to accredited investors from anywhere. A few that are worth checking out include:

• Angel Capital Association (ACA)
• Gust
• Investor

Those platforms make it easy to find prospective investors to connect with, without needing to do a ton of digging and legwork yourself.

4. Social media

Finally, don’t underestimate the power of social media. You can use the search functionality on networks like LinkedIn and Twitter to find people who promote themselves as angel investors.

Use the search functionality on those sites to search for “angel investor.” You can then use filters and advanced search settings to narrow down by location and other key terms.

How to pitch potential angel investors

Finding angel investors is only half the battle. Next, you need to figure out how to get them interested in opening their wallets and investing in your business.

In most cases, you’ll start the conversation via email. Stuck on what to say and how to get the ball rolling? Here are a few tips to perfect your initial pitch to angel investors.

1. Get specific about your needs

Before you reach out to anybody for an investment, you need to know what your business needs and your expectations are. Questions you should be able to answer include:

• How much money do you need?
• How much equity are you willing to exchange for that investment?
• How many different investors are you willing to take on?
• What will you use the investment for?
• Are you looking only for investors who specialize in a certain region or industry?

Reaching out to potential angel investors without that information in your back pocket can make you look unprepared. So, get this clarity first—it’ll go a long way in helping you structure a direct, concise, and informative pitch when that time comes.

2. Ask for an introduction

Let’s say you’ve found an angel investor you’re interested in approaching. Look them up on LinkedIn (even if that’s not where you found them) to see if you have any common connections or contacts.

If you do, reach out to one of those shared connections and ask if they’re willing to make a brief introduction. Warm outreach is always better than going in totally cold, and it’ll increase the chances that your email actually gets read by that prospective investor.

Not sure how to ask for an introduction? It doesn’t need to be anything too complex. Here’s a simple template you can use:

Hey [Contact Name],

I hope you’re doing well!

I’m starting [Business Name], which [products or services you provide/problem you solve]. I’m in the process of looking for angel investors, and as I was perusing LinkedIn, I saw that you’re connected with [Potential Investor Name].

Would you be willing to make an introduction? No pressure, but I figured it never hurts to ask!

Let me know how I can return the favor,

[Your Name]

3. Keep your email short and sweet

Whether you’re able to secure a personalized introduction or not, it’s time to reach out directly to the potential investor. You may be tempted to write a lengthy email detailing your background and the entirety of your business plan and idea. But you’re better off keeping this initial contact short.

Remember, this email is just supposed to get the ball rolling—it’s not intended to be your entire pitch. So, stay focused on the nuts and bolts right now. Think of this as your cover letter or elevator pitch. Your goal is to get them interested in learning more.

Here are the bare bones of this introductory email:

• One or two sentences about yourself and your background
• Your business’ value proposition
• How much you’re aiming to raise
• A Call to Action

We’ll talk about a few of these items below in more detail, but there’s one more aspect to pay attention to: your subject line.

Those few words will carry a lot of weight with whether or not your email even gets read or opened in the first place. In fact, 33% of people open an email based on the subject line. For that reason, make the intention of your email clear with a subject like:

• Introducing [Business Name]
• Seeking investment for [Business Name]
• [Business Name] investment opportunity

These clearly state what your email is about, without being too sales or promotional.

4. Nail your value proposition

When it comes to the ingredients of your initial email to an angel investor, one piece deserves most of your attention: your value proposition. This is a simple statement about why your business is the best choice for your customers.

Your first email shouldn’t be too long-winded, but it’s tough to capture everything that makes your business special in a few lines or bullet points.

For that reason, keep most of your emphasis on what problem your business solves. If you can explain the prevalence of a need and how your business fills it, that alone will help you stand out to investors.

5. Avoid “salesy” language

You know your business is something special, and you’re eager for investors to be equally enthusiastic about what you’re working toward.

That passion for your business is an asset, but it can also inspire you to use some salesy or gimmicky language.

Phrases like “Don’t miss your chance!” and “Once-in-a-lifetime opportunity!” can seem overly pushy or even misleading to savvy investors. Focus instead on being clear, straightforward, and honest.

6. End with a call to action

Every email should end with a call to action—otherwise, people finish reading and wonder what to do next.

In the case of this initial email, your call to action shouldn’t be to ask for an investment. Ask them to reply to the email or to schedule a call with you to get more details about your business and the investment opportunity.

This is your first correspondence, so requesting an actual investment at this stage is putting the cart before the horse. This introductory email is designed to get your foot in the door—so remember that patience is crucial.

Angel investors can get your business off the ground

Regardless of how resourceful you are, starting a business costs money—sometimes more than you’re able to provide on your own.

Rest assured that you don’t need to search your couch cushions for spare change. Angel investors can give you the capital you need to launch your startup.

Finding and approaching angel investors can be nerve-wracking, but adequate preparation can help to ease a lot of your anxiety. Use this as your guide and you’ll understand how to find angel investors—and how to get closer to securing the angel investment you need.