Everything You Need to Know About Angel Investors and Their Role in a Startup
How much do you know about the role of angel investors in the process of launching a successful startup? If you’re new to the game, probably not much. Well, angel investors play a crucial role in the process, especially in Romania, where most of my entrepreneurship has taken place over the past few years. Let’s try and understand what an angel investor is, how they can help you and your startup, and why, if you’re still a newbie, you need one around.
Angel investors defined
Basically, an angel investor brings two important things to the table:
- 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.
- 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.
In the past, it was harder to find these angel investors since most technologies wasn’t there yet to assist in the process. Entrepreneurs would go to conventions with a goal of selling themselves and their ideas, and with hopes of coming home at the end of the day with an investment secured. Today, the internet offers a bedrock for creating this initial interaction more easily. I, for one, receive investment suggestions via LinkedIn or on my website.
My belief is that everyone can become an entrepreneur. It’s not a matter of age or characteristics, but rather having enough experience. That’s why I recommend working as an employee of a startup or high-tech company for a while before ‘leaving the nest’ and setting up your own venture.
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:
- Approach — the entrepreneur first contacts the investor via email, phone, meeting, etc.
- 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.
- 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.
- 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.
- Accompanying — remember, as I said, the angel investor plays an important role as a mentor in the process of developing and gaining capital.
- 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.
But wait, there’s more
That’s pretty much the timeline of an angel investor’s role in making your dream come true. But there’s a lot more to be said here, as well as a few tips from me on how I see angel investing. You can find all of that in an article I recently published in the reputable