When startup businesses need an injection of capital to take them to the next level of growth, there are a number of funding options entrepreneurs can turn to. Angel investors are a common source of this early stage funding.
Angel investors can provide a one-time investment to propel the business forward, or an ongoing injection of cash to support the company through the notoriously difficult early stages. Angels receive equity in the business in return for their investment, and tend to be focused on helping businesses take their first steps, rather than the future profit they may receive.
The good news for entrepreneurs is that angel investment in the UK is thriving, and there are always angels on the lookout for sound, well-managed companies to invest in. But how do you find an angel investor for your business?
Step 1: Define your business
Most angel investors specialise in a particular sector, so the first step is to properly define your business and think carefully about the sector(s) you operate in. Once you have done that you can start to identify individuals or investor groups with a track record of success in that sector.
When considering potential investors, do not only think about the primary sector you operate in. You should think laterally about the possibilities your product offers in different markets and the industries it could be used in beyond the obvious. This will not only help to widen your search for an investor, but it will also give you a strong sense of how your product or service can be used and where it fits in the wider marketplace.
Step 2: What does your dream investor look like?
Once you’ve defined your business it is then time to consider the attributes you would like in your dream investor. A good place to start is to think about the experience and skills you lack. You can then consider how an investor’s current job, past experience and the areas they typically invest in will help to fill these gaps. An investor’s attitude to risk is another important factor to consider. Do you need a conventional investor, or someone who is willing to take a chance?
Step 3: Create a list of target investors
Now you know what your dream investor looks like, the next step is to draw up a list of active angels who meet those criteria. Websites like the Angel Investment Network are a good starting point for entrepreneurs and will give you an idea of the active investors in your sector. However, networking in your sector, attending industry events, talking to fellow entrepreneurs and mentor figures is likely to lead to better insight and even some introductions. The more you know about an investor, the more likely they are to be a good fit for your business.
Step 4: The introduction
The next step is to take that leap of faith and make contact with potential investors. Once you have a list of potential investors, you can introduce yourself in person at a conference, via email if you have their contact details or even through a platform like LinkedIn. You may find you have some connections in common who may be able to introduce you, which would be even better still.
At this point, rather than rushing in and asking for investment as soon as you meet, take the time to build a relationship and find out more about them. Are they interested in your business’s growth? If not, it’s time to move on.
When should you search for an Angel Investor?
There is no right or wrong time to approach an angel investor, although generally speaking, the earlier you start the search the better. Of course, it’s essential you have a good value proposition already in place, but from that point on you should look to start the process. It’s important to understand that there is a time in your business cycle when your chances of finding raising angel investment will be maximised. There’s also a lot of emotional buy-in behind an investment, so take the time to get to know the investor and their team and you could benefit from a lot more than money.
Need a little help?
Prosper provides a comprehensive approach to accountancy, tax & business growth services for start-ups across the UK. We are your bookkeeper, accountant and finance director all rolled into one. Check out letsprosper.co.uk to learn more about how we can help your business.