Why Look for an Angel Investor?
When you plan to start a small business enterprise but lack the necessary capital to fund the business, you usually look for ways to secure the necessary financing. You can approach a bank or any other financial institution for a loan. Another way to secure funding is to find an angel investor. The advantage of involving an angel investor in the business is not limited to an influx of funds but may also extend to the wealth of knowledge, expertise, experience and contacts that he may bring to the venture.
If you want to avoid the usual hassles of approaching a bank for financing your small business, try looking for an Angel Investor – someone who is truly interested in seeing your business succeed for all the right reasons – through networking or business contacts.
What Is an Angel Investor?
An angel investor is a person who has funds at his disposal that he would like to invest in a business. Most often, the reason for such a move is to get more returns than what is available through more traditional methods of investing. The angel investor could be an executive who has retired early and is looking for a job in his field of expertise. He would invest in the new business to negotiate for a position in the company and get involved in the day-to-day activities. The “angel” might be an entrepreneur who has a specific business and would like to invest in something that would fill a support function for his current business. The investor could also be a retired person with lots of time and money on hand and with a flair for investing in successful business deals. These people do not necessarily want to be involved in the business and are happy with just getting the financial returns.
Although there are no officially certified details, it is estimated that every year nearly 30,000 small businesses are financed through angel investors. The total investments are in the range of 20 to 50 billion dollars each year. The United States has about two million people who are capable of becoming angel investors.
How to Locate an Angel Investor
It is extremely difficult to find people who would be prepared to invest in a project that you believe in. The rule is to use your social and professional network to identify such people. Start by discussing your needs with your banker. Being in the financial market, he may know of people interested in investing in a new business and can also provide you with a reference if the need arises. Your accountant or lawyer may also prove to be of help. Get contact details from them, schedule appointments and discuss your plans.
“Deep networking” is also a good option. You can speak with acquaintances and other business associates who may be in a position to provide you information about, or references of people who may themselves be angel investors. It is a good way to reach a person who may give you vital input for the good of the business. You may also research on the Internet, where networking firms provide contact details for investors for a subscription fee. They will also include your contact and business details in their database.