Are you planning to start your own business? Well, if yes, then make sure that you are ready to deal with a lot of work. You may come up with a profitable business idea for your startup. But most of the start-ups or you can say entrepreneurs face a lot of issues when it comes to the funding.
The lack of sufficient capital prevents young entrepreneurs from turning their dreams into reality. A recent survey informed that more than 95 percent of startups demolishes in their first year of commencement. This is where the angel funding for small business startup comes to play. But the biggest question is here is how to find a perfect investor for angel funding.
Every type of business need capital. However, the amount of funding dramatically depends on the business’s nature. All most all the startup funding companies only prefer to invest in a company that has the ability to offer a better return on the investment. So, if you have a startup plan, make sure it is perfect enough to help you in establishing a revenue-generating unit. Now, let’s know more about such investments.
Angel Funding For Small Business Startup
Talking about angel investors, they are a critical part of startup fundraising. In general, they are individuals who invest money in startups and new businesses. They can be professionals from different fields who want to help small-scale startups to turn their dreams into reality.
When they invest, in return, they obtain some shares of the company in which they are investing. They don’t invest money; they also help the new businesses to sustain in the market by offering then effective business strategies and other assistance.
If you consider the views of some well-known investors, a new business should go for angel startup business funding when the company’s MVP- Minimum Viable Product and economics is stable. Besides, you need to make sure that your products and services are unique and something out of the box. However, if you already have some customers and your business is operating, then your chances for attracting angel funding for small business startup is more.
Now you might be thinking about how to locate an investor who will be willing to invest in your startup business? Well, you can begin with your own network. In such a case, your family and friends can be the first target. The reason is you can easily gain their trust. Besides, you can get in touch with angel startup funding companies on different social media platforms. They are the best option to get funds.
When to Raise Angel Funding?
Angel funding, with time, has gained a massive prominence in the market. The major reason behind this is bootstrap funding is the default funding option for any type of start-up. But what point of time, a start-up owner should look to raise the fund? Well, as per the angel investment expert, the ideal time to raise funds is when the owner has a perfect business model and idea.
It is true that the timing to raise such fun can have a massive impact on the final result. So, before planning a perfect timing to raise funds, the entrepreneurs should prepare detailed industry research, business plan, and a roadmap for the development of their products and services. When you have all the required information, you can easily get angel funding for small business startup.
Additionally, before starting the process, make sure your products and services are all set to introduce in the market. If not, at least make sure they are in the last stage of the development. When you have perfect product prototypes or a full proof concept, you can convince the investor and get funding for startup. Now, let’s understand how to attract the best angel investors.
Tips to Effectively Attract An Angel Investor For Investment
There is no doubt that taking the help of an angel investor can bring a lot of benefits to your business. They can take high-risk. But when it comes to convincing them for startup fund investment, it can be very challenging for you. However, here are some tips for you that can help you with this.
1. Prepare the right plan
The most crucial aspect of attracting angel investors is to cover all the basics requirements. What to do for this? Well, you need to develop an ideal business plan covering some significant aspects, such as business processes, it’s structure, risks, market projections, and more. After all, they want to make sure that they are investing the cash in the right business. Such investment doesn’t involve any guarantee. So, investors choose a company that has proper business planning.
2. What is the exit strategy?
Well, not all startups can make profits. This is quite natural. So, investors will also look at whether you have an ideal exit strategy of not. Most of the investors encourage new entrepreneurs with their supports. But they will want to know if you fail, how can you pay them back? So, think about it. However, some preferable exit strategies are offering the right to sell the company’s share and acquiring money by merging.
3. Understand your niche
Sometimes quality matters more than quantity, and it can save time during essential phases. Angel investors, before investing, use their knowledge to know in which industry they can enjoy profitable opportunities. Find out the major factors of the industry you are entering. Don’t forget to highlight those factors in the presentation. Now, show the presentation to the angel investors who know that industry. They will be able to understand the risks and opportunities involved in the industry.
4. Let them come into your business
Most of the angel investors want to have some management control in exchange for their investment. So, it comes to angel business start-up funding, make yourself ready for it. After all, in exchange for offering some powers, experts’ assistance and business strategies can help you in growing your business.
While pitching, clearly mention about how many levels of power you can offer to the investors. Well, let them tell what they want and allow them to come in. In fact, they don’t want much. The investors want a fair percentage of profit sharing and their involvement in the company’s meetings.
5. Don’t move forward without a strong team
Your idea is fantastic, your startup business plan is good, and you are ready to accept the investors’ terms and conditions. Now, what more you need to do to get funding for startup from the angel investors? You are missing out on one crucial factor, i.e., a perfect team. You can’t run the business alone; you need a team. So, you need to build a team of specialists and experts.
While investing, the investors don’t just look at your company; they also analyze your team and every member’s capabilities and skills. Remember that, when you approach the angel investors, you are not selling the investors your company’s products and services. Along with that, you are also selling your team. Keep this in your mind.
6. Don’t forget to ask for advice
Want to impress and convince the angel? Ask for the advice first. With this, you can develop a strong relationship with the investor. With this, you are giving your investors a chance to find out possible flaws and show that you really value their advice. So, take advice from them, implement it, and they will be ready to invest their money.
7. What will be their return on the investment?
All the startup funding companies want to make money when then invest in your business. So, it is quite vital for you to let them know how much they will gain from the investment. Whether you are showing a presentation to an individual or an angel investing firm, you need to tell how much return they will get. Well, some investors may want a 20 to25 percent return on their investment.
8. Be patient
All entrepreneurs should be thick-skinned and passionate. Remember that the startup fundraising process can take a lot of time. Besides, it is a process where your ego will be tested again and again. You should have a sufficient level of passion and persistence.
Moreover, don’t consider your rejection as a setback. Besides, always remain confident. You need to present your business ideas confidently in front of the investor. Don’t miss any chance to show your passion for starting the business. Be sincere about the plan and startup.
For every startup and young entrepreneurs, angel investors are the perfect solution to their funding requirements. But convincing them for the investment is challenging. There is a lot of factors that can influence the decision of the investors, whether to invest or not. So, to increase your chances of success, prepare yourself for it. Once you understand what type of angel funding you want, follow the tips mentioned above, and you can increase your chances of attracting an investor for your business.