How to Raise Funds Through Angel Investors

Finding an Angel Investor- Small Business Funding

Nov 5, 2009 Fleur Hupston

Angel Investors are investors prepared to help entrepreneurs get their businesses off the ground by extending credit and may offer their expertise and experience as well.

Also referred to as an informal investor, an angel investor is generally an affluent individual who is prepared to provide capital for a business start up or as bridging finance in exchange for convertible debt or ownership equity. Angel investors may work individually or in groups.

Angel investors typically use their own funds, unlike venture capitalists who manage the pooled money of others in a professionally managed fund. Angel investors are prepared to invest amounts anywhere from a few thousand to a few million dollars.

What Criteria does an Angel Investor have?

This varies a lot- although angel investors are prepared to offer credit, they are careful to protect their investment and are certainly not reckless. They generally look for "hot" products or ideas.

An angel investor typically wants to see a comprehensive business plan which would include clarity on the reason for financing, how the capital will be spent, timetables for going public, description of the business, strategy, target market, projections, products and services, economics of the business, marketing plan, management team, financial plan and an executive summary.

Angels can also provide a business owner, not just with money, but guidance, advice and a mentor relationship. Also called "advisory investors," they are generally not interested in controlling the business, but may require the business owner to meet certain business goals or follow certain business practices.

Where can Angel Investors be Found?

The Finance Directory of Investors is a starting point. More online searches will reveal where to find investor networks in a particular area.

Do homework to ensure that the investor being approached is a good fit for the business concerned. An entrepreneur is more likely to succeed if there is a pairing of interests, for example a passion for technology. Most angel investors are successful entrepreneurs in their own right.

What does an Angel Investor Expect in Return?

Angel investors take a huge personal risk when it comes to investing funds in a business and they typically expect high returns within five years or so in return. Angel investing can be an expensive way of getting the necessary funds, but it does fill the gap in instances where banks will not extend loans due to the business venture not qualifying by traditional banking standards.

Many angel investors take steps to protect their investment by asking the business to ask for their approval before certain actions, for example, selling company assets or issuing of stock, or they may have other criteria.

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Source:

smallbusinessnotes.com, information retrieved 5 November, 2007

The copyright of the article How to Raise Funds Through Angel Investors in Mortgages/Loans is owned by Fleur Hupston. Permission to republish How to Raise Funds Through Angel Investors in print or online must be granted by the author in writing.

Finding Small Business Funding	How to Raise Funds with Angel Investors	Getting Funds with a Private Investor
Small Business Funding - Present a Business Plan