Accounting & Finance
What StartUps Should Look For In An Angel Investor
The most successful startups understand that finding the right angel investor is much more than finding the cash.
An engaged, passionate, and experienced investor brings more than just money to the table. Yes, the funding helps the growth and development of the business. Still, by choosing the right person to invest in your company, you will get additional strategic value.
Partnering with an angel investor should not just come down to money. To succeed, you need to focus on the bigger picture and consider the different variables and factors, both on a human and business level.
Unsurprisingly, investors do the same when assessing whether a startup is a good prospect for them. Bob Rice, an Investor at Tangent Capital, said: “Most VCs will go through a checklist, and everything’s got to meet our criteria. We don’t want to see a steak if we’re vegetarian.”
What To Look For In An Angel Investor
Here are three things startups should look for in an angel investor.
- The investor adds value in areas where you lack skills, knowledge, and experience.
- Shares your vision and goals
- Honest and open communicator
1. The Angel Investor Must Add Value Where You Are Lacking
No startup is immune to growing pains. Some of the world’s biggest businesses started from very little in terms of money, experience, and human resources.
As a startup, in whatever chosen industry, areas of the business will be weaker than others. Thinking about the gaps slowing you down and the places you think need improvement will help you make a savvy decision when seeking an angel investor.
Angel investors often have deep pockets but are also booming, experienced entrepreneurs. They have made millions. They have, in effect, ‘been there, done that, got the T-shirt’, and this real-life, on-the-ground experience will benefit the health of your business as a whole.
The best investors are not those who just put down the cash but champion your cause, motivate you to do a better job, and, most importantly, provide you with guidance and counsel through a pivotal time for your business. An engaged investor will be a stable platform to bounce ideas off and a springboard for new ideas.
Look for experience and a proven track record of investments. But also look at their connections and networks. This assessment will allow you to see how much social capital value they can add to the business.
Angel investors with long and successful careers behind them will know people in every business sector. They can put you in contact with individuals who can help grow the business. They know the best marketers, accountants, best app developers or know people who do the right professionals to get you the services you need.
Look at an angel investor as a real-life networking asset for your business. They will be able to open doors for you, and it’s in their interests to do so.
2. Investor Shares Your Vision And Goals
For many startups, there are strong moral and ethical reasons for wanting to start a business. If you fit into this bracket, make sure you find an angel investor with the same interest and passion.
Passion follows commitment. The investor will be more committed to your journey, and you will be united through a shared goal and dream. Most successful investors don’t just throw their money anywhere. If you are both interested in the same things and driven by the same passions, you’ll rank higher on their investment list.
Angel investor Robin Elenga has been quoted as saying: “I look at the team, the opportunity, the terms, and the ability to exit. For the team, I look for domain experience, motivation, creativity, and the ability to execute. I also look for honesty, transparency, and humbleness.”
3. Find An Investor You Want To Work With
Many factors will determine whether a startup makes it to the big time, but most investors will tell you that a critical part is the people behind the business. Any successful investor-startup relationship is founded on teamwork, communication, mutual respect, and understanding, which is the key to any startup’s success.
It’s essential to look at the process of finding an angel investor on a human and a financial level. Do you think you’ll have a positive relationship with them? Do you feel that you can communicate effectively with them, and will you be able to work with them long-term?
Peter Cowley, the chairman of Cambridge Business Angel, said:
If I don’t have an open, honest relationship with them, then trust will be challenged or non-existent, and I will struggle to be able to support them with advice and further funding. A good relationship extends beyond investor/investee to being close colleagues or even friends.
Finding the right investor can make or break your company. It might be easy to go with the one with the deepest pockets, but don’t be fooled; choose an investor who’s the best fit for you and your business.