Everything You Need to Know About Angel Investors and Their Role in a Startup

Here’s a crash course on angel investors and their important role.

Angel investors defined

Basically, an angel investor brings two important things to the table:

  1. Money: Entrepreneurs turn to angel investors for initial funding. This is before the stage when banks or funds enter the picture, and the sums are accordingly but are still substantial for the early phases.
  2. Experience: The more important role of an angel investor is to be there for the entrepreneur if they need advice, consultation or even someone to listens to their issues.
It’s not just about the money — you can learn a lot from your angel investor’s experience.

Breaking down the process

Before we discuss the steps to successful angel investment, there’s one important point to be made: You don’t get a second chance at first impressions. Angel investors usually have a lot on their plates and receive many offers, so you usually get one chance to present yourself and your idea — don’t waste it. Here are the four key steps:

  1. Approach — the entrepreneur first contacts the investor via email, phone, meeting, etc.
  2. Discussion — this is where your pitch comes in, this is how you sell yourself to the investor. I would recommend using a format of a presentation called a pitch deck, which enables you to present your idea precisely and quickly. You can find it online with a simple search, as well as some good examples of what the end result is supposed to look like.
  3. Consideration — this is the time the investor takes to make up their mind. Among other things, they consider the logic behind the idea presented, its SWOT (strengths, weaknesses, opportunities, and threats), the return on investment, and so on.
  4. Decision — at this stage, the investment sum is agreed upon, as well as the characteristics of the investor’s revenue. A legal contract is usually signed between the two sides.
  5. Accompanying — remember, as I said, the angel investor plays an important role as a mentor in the process of developing and gaining capital.
  6. Funding — the startup manages to raise capital from banks, funds, or the stock market. At this phase, it is accepted for the angel investor to reap their profit and end their role.

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