Angel Investment 101
Angel investment is a crucial avenue for early-stage startups to secure funding from individual investors. They provide not only financial support but also valuable expertise and connections.
In our first ever episode Angel Investment 101 : Mae Yip, Amardeep Parmar, Emmie Faust, Surlender Pendress and Desigan Chinniah talked all things, ‘Angel Investing’.
The amazing panel discussed the motivations and expectations of angel investors which are key to successful fundraising.
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Here are some key learnings to consider:
Understanding Angel Investment vs. Venture Capital
- Motivations: Angel investors prioritise building relationships and providing value beyond financial investment. VCs focus on maximising returns through large investments.
- Approaches: Angels emphasise personal connections and support, while VCs focus on financial metrics and scalability.
- Fundraising: Social impact businesses found that VCs were not the best fit for them. They have strict criteria and are investing other people’s money. Therefore, they had more success raising funds from individual angel investors who believed in their social impact mission.
Angel Investment Ticket Sizes and Equity Expectations
- Ticket size refers to the amount of money an angel investor puts into a deal. It can vary widely, but entry-level investments are often around $5,000. If investors are part of the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme. You have to pay to apply for that.
- The equity an angel investor receives in exchange for their investment depends on the startup’s valuation and the amount invested. Early-stage investors may receive more favourable terms as a reward for taking on higher risk .
- Valuations are a critical aspect of angel investing. Both pre-money and post-money valuations used to determine the company’s worth before and after investment, respectively . Valuations can fluctuate based on market conditions, the startup’s progress, and investor sentiment.
Be careful when starting conversations, with minimum investment amounts. Focus on building relationships and evaluating potential investors’ value beyond capital .
Leveraging Angel Investors for Business Growth and Finding the Right Investors
Research:
- Understand potential investors’ motivations and past investments to find suitable matches. Use special purpose vehicles (SPVs) like AngelList, SideCar Angels or Odin to consolidate many small angel investments onto one cap table line.
- Value Beyond Money – Focus on finding angels who believe in your mission and vision, providing value beyond just financial investment.
- Create lists of potential investors through services like Fiverr.
Networking:
- Attend startup events to network and build relationships with potential investors. Don’t directly ask for money, share your business and see if they’re interested.
- Reach out to angel investors through cold emails and LinkedIn messages to get the business in front of as many people as possible.
- Use existing connections to reach new investors and build credibility in the investor community.
Pitching:
- Connect with angels who believe in you as a founder and your mission first.
- An angel will usually invest in the founder first and the business second.
- Clear proposition and validation are key to attracting investment, focus on specific use of funds and potential return on investment.
- Submit your pitch deck through Amar’s website to get in front of his network of investors : The BAE HQ.
