How to find angel investors?

An angel investor is an investor who invests without much strings attached. Mostly angel investors are found in friends, and family, and rarely among strangers who you can touch with your passion. Greg Mortenson for example wrote about finding such an angel investor for his school project by writing letters to hundreds of wealthy, and famous people, and one of them responded, and gave him the right amount. Greg Mortenson had a strong social cause and was able to demonstrate his commitment toward that cause. However, Mortenson’s story is not common. GEM (Global Entrepreneurship Monitor) survey and other research on the subject reveal that around 50-60% of the money entrepreneurs around the world can find within friends and family.

However, before looking for investment, please read the first half of this book, and evaluate whether you need investment in the first place or not. If you are looking for investment without experience and starting something on a very small scale then please reevaluate what you are trying to do.

So in case if you have evaluated your options and plan, and you do need some financial injection, then see if anyone in your family or friends can do that. Ask yourself this question, what if I have the money, and someone comes to me asking for investment, why would I give it to him or her? What questions would I ask, what would I look for?

An obvious reply would be the dedication, and commitment of the person and evidence convinces the angel investor about your dedication, and commitment. Also, your record would matter. Most likely the investor would already know you personally or through a strong reference. So have your record sound enough to establish credibility.

All of this is being said keeping in view if there is such a person in your network who has enough to invest and is eager to invest as well. Often when people start a business, and it grows to an extent, people automatically come forward with proposals to invest, and partnership.

If this happens, and it may happen more than often, then the tables would turn for you, and you will rather be in a position where you will have to evaluate if it would be safer, and beneficial for you (keeping in view the psychological pressure an investment brings), and your business or not.

If the tables turn, ask then you must be very sure about the exit strategy! You must agree with the content of it in writing with the incoming investor. It is the strategy of ending a business relationship in case if the business fails or the investor wants to bail out for whatever reason even if the business is running alright. It would be better to involve, and discuss a corporate lawyer here, and do necessary legal paperwork even if the amount is not large enough.

Often businesses collapse just because an investor wants to bail out, and the entrepreneur has to sell a considerable amount of fixed assets or inventory without which the business cannot operate. So to avoid any such scenario, prior terms in writing need to be agreed, like to draw back the investment the investor would take small installments which would be a percentage share in profit, etc. Please recall the importance of trust in every business relationship, which I explained above (see ‘How to build credibility?’). 

Without truth, this particular relationship between an investor, and entrepreneur cannot also work, particularly when the investor has trust issues. Also as an entrepreneur, you must always try to avoid any activity which may create doubts in the heart of the investor. Investors are also like partners, and to avoid any conflict with them please see the page on avoiding, and resolving conflicts.