1. Finding Angel Investors
2. Fundraising Considerations
3. Due Diligence
4. Non-Monetary Benefits From Angel Investors

How much do angel investors usually invest? A typical investment is between $15,000 and $250,000, although it can vary significantly. Usually angel investors contribute a relatively small amount of capital into a startup company.

Angel investors are often friends or family members. They might also be experienced venture capitalists or entrepreneurs. Oftentimes, angel investors are already in the picture before the business starts producing revenue.

In general, angel investors believe in the company's founder, not just the potential success of the business. They seek enthusiasm, commitment, integrity, and a cooperative mindset. When evaluating your idea, they will look at the big picture. What opportunity does it present? Can the idea become big, if not monumental? Angel investors will want to examine your business plan and understand how you expect to gain loyal customers and at what cost. It's even better if you have unique technology that can be patented or protected. In addition, investors will want to work with businesses that have reasonable terms and valuation.

Finding Angel Investors

The most obvious starting place to look for angel investors is among friends and family members. However, be cautious when going this route, as mixing personal and professional relationships could cause detrimental issues down the road. Losing a close friend or family member's money might ruin your relationship, so be certain you are both willing to risk it before you accept their money.

It's worthwhile to look for angel investors outside your immediate social circle, but doing so might take longer since most angel investors don't advertise the fact that they fund startup companies, especially if they don't know you. Make sure a potential investor is familiar with your field of industry.

Raising funds is often very time-consuming. Even if all goes according to plan, it can take much longer than you expected. It especially takes time to find the right investors for your company. Once you've found an interested party, you still need to have meetings, negotiate the terms of the agreement, and work through due diligence.

Fundraising Considerations

As you start developing a plan to raise money for your business, take the time to ask the following questions of your potential investors:

  • What startups have you funded previously? Will you refer me to them?
  • How do you interact with your various startups?
  • How do you assist the companies you fund?
  • How can you help our business grow?
  • How can you help us find important partners?
  • Which venture capitalist firms are within your network that could fund our next round?
  • Have you funded other companies within our space?

Due Diligence

It can take time for a potential investor to examine the company's background in order to determine its viability. Due diligence includes numerous aspects of a company, including the following:

  • Corporate materials — including articles of incorporation, shareholders, bylaws, and organization.
  • Financial materials — including statements, auditor's letters, projections, and analyses.
  • Physical assets — including equipment leases.
  • Real estate — including leases, business locations, mortgages, and permits.
  • Intellectual property — including patents, copyright, and trademark documents.
  • Permits and licenses.
  • Tax documents.
  • Partner agreements and terms.
  • Customer information.
  • Litigation information, if applicable.
  • Insurance documents — including current coverage and past claims.
  • Media mentions — including press releases and analyst reports.
  • Environmental documents — including hazardous substances used.
  • Professionals — including attorneys, accountants, and other contractors.
  • Suppliers and accounts.

Non-Monetary Benefits From Angel Investors

Angel investors don't just assist you with fundraising. Often, they are experienced entrepreneurs who can provide valuable expertise to help your business grow and succeed. However, the time they spend with your company is not dependent on the size of the check they contribute. Make sure to ask potential investors how much they usually help their companies once the investments have been made. Angel investors rarely take board seats or exercise control over the company. You might consider asking your angel investors for network introductions before the next investment round, but don't count on much more than that.

Although certainly not a given, the right angel investor might be willing to connect you to:

  • Venture capitalists.
  • Strategic partners.
  • Potential customers.
  • Potential employees.
  • Lawyers.
  • Attorneys.
  • Banks.
  • Accountants.
  • Investment bankers.

Simply being connected to your angel investor may also provide credibility.

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