Funding 101: Prep


Angel Investor Guide

Finding and pitching an angel investor goes hand in hand with being an entrepreneur. Angel investor capital accounts for the most common source of funding for startups who need someone to bet on the company in the early stages of its development.

This guide will walk you through what angel investors do, how to find them, and what the angel investor pitch process looks like in detail.

Angel Investor Basics

Here, we will walk through the Angel Investor basics from explaining what angel investors are to a simple explanation of how they work.

What are Angel Investors?

Angel Investors are a critical source of capital for young startups looking to raise their first round of cash. They tend to invest long before professional venture capital or private equity firms do, with check sizes between $5,000 and $500,000 on average.

Profile of an Angel Investor

The typical Angel Investor is a high net worth individual, often a successful entrepreneur in their own career, that is looking to make personal investments in a small number of deals. Their value to an entrepreneur can extend beyond the check, since a well-connected angel investor can open up doors to potential customers and larger investors as well.

Angel Investor Groups

Angel Investor Groups are made up of a number of accredited angels that band together to review new deals and make investments together. Entrepreneurs can benefit by broadcasting their deal to the angel investor group. The group may invest as a whole or individually based on how the individual angel investors feel about the opportunity.

Businesses Angel Investors Fund

The businesses angel investors fund tend to be local companies that may target industries where they have personally made money before, although that's not always a requirement. These investors want to get an early stake in your company, but they want to have an early relationship with you personally so they can see the company build traction before they write a check.

Find Angel Investors

How to Find Angel Investors

Looking for Angel Investors starts with three primary criteria; industry, location, and stage. Depending on what industry you are in, your location, and the stage where your company is at will determine the angel investors you will want to talk to. Here, we will discuss how to target particular angel investors by targeting your search, researching their portfolio investments, and finding out where they get their deals from.

Using an Angel Investor Network

Using an Angel Investor Network can be a very effective way to connect with angel investors. You will want to group the firms according to your needs and use the network to contact the angel investors. Using an angel investor network can give you and your opportunity added credibility.

Using an Angel Directory

An Angel Directory is simply a site or publication that provides a list of popular angel groups. Angel Directories can be useful as a starting point to help narrow your search and focus in on the angel investors you want to target for investment.

List of Angel Investors Groups

Angel Investor Groups exist all across the country. In fact, there are likely Angel Investor Groups in your city that you should evaluate for investment. Angel Investment Groups often favor local deals so targeting groups close to you will give you a leg up.

Angel Investor Process

How to Contact Angel Funding Sources

Contacting your target angel funding sources isn't that different than starting any relationship. It begins with looking for a common relationship that you can both relate to. You'll want to spend time crafting a well-written introduction and elevator pitch that gets your message across quickly and professionally.

How to Pitch Angel Investors Properly

Once you've gotten an angel investors' attention, you'll want to make sure you're ready to deliver a compelling pitch to angel investors that moves your deal forward. You'll need a strong elevator pitch, a pitch profile, executive summary and pitch deck at the very least in order to make your way through the process.

Angel Investment Deal Structures

The two most common types of deal structures for angel investment deals involve either a straight equity stake in your company or a convertible note. Either of these structures will be proposed in the coveted "Term Sheet" which is an angel investor's non-binding proposal that outlines the terms of their investment.

Common Angel Investment Terms

What's the difference between a "pre-money" and "post-money" valuation? What does "vesting" mean? What's a "cap table"? It's easy to get confused by all the angel investment community uses, so we'll give you some quick explanations of what it all means and what you need to know.