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Three things startups should look for in an angel investor

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The most successful startups understand that finding the right angel investor is about much more than finding the cash.

As I’m sure early stage investors such as Tom Chapman and Piers Linney would agree, 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, but by choosing exactly the right person to invest in your company, you will get additional strategic value on top.

The process of choosing to partner with an angel investor should not just come down to money. To make a success of it, 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. If we’re vegetarian, we don’t want to see a steak.”

Here are three things startups should look for in an angel investor.

1. Find an investor who can add value in the areas you can’t

No startup is immune to growing pains. Some of the world’s biggest businesses started from very little, both in terms of money, but also experience and human resource. As a startup, in whatever chosen industry, there will be areas of the business which are weaker than others. Thinking about the gaps that are slowing you down and the areas you think need improvement will help you make a savvy decision when seeking an angel investor.

Angel investors often have deep pockets but they’re also successful, experienced entrepreneurs. They have made their millions. They have, in effect, ‘been there, done that, got the T-shirt’, and it’s this real-life, on-the-ground experience which 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 what is a pivotal time for your business. An engaged investor will be a sound 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 a long and successful career behind them will know people in every business sector. They will be able to put you in contact with individuals who can help grow the business. They will know the best marketers, the best accountants, the best app developers. 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. Find someone who shares your vision and dream

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 who shares the same interest and passion as you.

From passion follows commitment. They will be more committed to the journey you are on together and you will both 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, ability to execute. I also look for honesty, transparency, and humbleness.”

3. Find an investor you want to work with and not just the one with the deepest pockets

There are many different factors which will determine whether a startup makes it to the big time or not, but most investors will tell you that a key factor is the people behind the business. Any successful investor-startup relationship is founded on teamwork, communication plus mutual respect and understanding, and this is the key to any startup success.

It’s important to look at the process of finding an angel investor on a human level, as well as 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 both you and your business.

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