June 7th, 2019 | By: The Startups Team | Tags: Funding
Angel investors are typically high net worth individuals who invest very early into the formation of a new startup company, usually in exchange for convertible debt or equity. Angel investors serve as a critical bridge between the very early stages of a startup and financing they’ll get later on. That’s because angels are much more likely than other types of investors to take on high risk investments without much proof of return. In other words, they’re betting on you and your idea — not your metrics.
Angel investors tend to invest in companies that are in industries they know a lot about. So, for example, if an angel investor made a lot of money in the real estate industry, you can imagine they would be most comfortable putting money back into that industry. After all, they know the industry, including the right questions to ask, what kinds of opportunities exist — and who’s BS’ing them.
That’s not to say that it’s the only criteria for angel investors. They may have made their money in gold mining, but are looking to make investments in tech companies because they think that’s where the big upside opportunity is.
While you wouldn’t want to count out an angel investor who didn’t come from your industry, you would definitely want to seek out those who might have a built-in affinity to your industry first.
So how do you find an angel investor? One way is by seeking out angel investor groups or networks, which are exactly what they sound like: Groups of angel investors who get together to invest their money, in order to have a greater impact than they would on their own.
There are two different types of angel investor groups: formal (official groups of angel investors) and informal (like your friends and family, if that’s your background).
Let’s take a look at both.
Angel investor groups There are angel networks and groups that, on the surface, look like the best and efficient way to get in touch with angel investors. But consider one thing: If you can find them, so can other founders.
That means they get bombarded with emails, pitches, and proposals. What’s the likelihood that your email is going to get through the flood of emails that they receive every hour of every day.
But that doesn’t mean all hope is lost! Do your homework and find a warm connection, even when approaching an angel group or network. It’s your best bet if your goal is to actually get in front of an angel investor and not just to end up automatically in the reject pile.
Online angel platforms Recent years have also seen a mini explosion of online platforms for angel investors. Angel Capital Association is one, with more than 13,000 accredited angel investors. Each site is going to have its own requirements and expectations for connecting with angels, however, so pay attention to the rules and processes outlined on their site.
And again, remember: They’re getting a lot requests. Follow their rules and then do your homework to see if you can find a warm connection, even if you’re connecting through a site. You’re always more likely to be successful with a warm intro than with a cold call or email.
Angel investor groups Finally, angel investor events happen across the country. They’re a great opportunity to get your startup in front a range of angel investors who are actively looking to invest. Do a quick search engine search to see if any pop up in your region.
But don’t stop there! Do your homework before attending the event. Who’s going to be there? What industries are they interested in? Who’s interested in your industry? Take the time to figure out who the most likely
A good place to start is your own friends and family. Are there high net worth people in your personal networks who are already investing in startups? A warm connection is always to your advantage when you’re startup fundraising, as most people are more willing to invest in people that they know than in those they don’t.
So ask around. You might be surprised to find an uncle who’s looking to invest or a cousin who just came into some money and is looking for something to do with it.
As with most things in the startup business world, you’re always going to be more successful with a warm intro than a cold pitch, so be willing to take your time and do your homework as you search for angel investors.
There are angel investor groups all over the country, from East to West Coast and nearly everywhere in between. For a thorough run down of angel investor groups in your region, check out this list from Angel Capital Association.
In the meantime, here’s a list curated from Crunchbase’s database of angel investor groups. This list is the top 10 angel investor groups, based on the number of investments they’ve made.
Number of investments: 204 “Apax Partners is an independent global partnership focused solely on long-term investment in growth companies. Funds advised by Apax Partners typically invest in large companies with an enterprise value between €1bn and €5bn. The Funds invest in four sectors: Tech & Telco, Services, Healthcare, and Consumer.”
Number of investments: 191 “Creative Destruction Lab is a seed-stage program for massively scalable, science- and technology-based ventures.”
Number of investments: 152 “OurCrowd breaks barriers to startup investing, providing global, VC-level dealflow, due diligence and terms to accredited investors.”
Number of investments: 146 “Kohlberg Kravis Roberts is a global alternative asset manager focusing on private equity, fixed income, and capital markets.”
Number of investments: 128 “Giza Venture Capital is a seed and early-stage technology companies investor.”
Number of investments: 80 Indian Angel Network is one of the leading Angel Investors Network in India. We are the business angel or informal investor.
“GameFounders is a European business incubator that provides gaming startups with seed capital.”
“AngelList is a U.S. website for startups, angel investors, and job-seekers looking to work at startups.”
“META is an investment and advisory platform that provides innovative solutions related to knowledge-intensive entrepreneurship.”
“Fosun Group is a classic story of success after China's reform and opening-up.”
Not sure angel investors are the right fit for your startup? Looking for other types of startup funding? Check out our guides to the full range of options!