If you’ve established that you need additional capital to build and scale your company. You’ve also established that venture capital is the best route for your company, so angel investors are most likely going to be your first investors. So what exactly is an angel investor? An angel investor invests in early stage private companies in exchange for equity.Angels are generally the first money in, therefore taking the highest risk. In exchange for taking on more risk, angel investors either take more equity or the option to participate in future funding. Angels are a great route to bridge the gap between building your initial product and getting your first users or customers.
So who are these angels? They’re typically well-connected, wealthy individuals who invest their own capital. Angels can invest at any amount, but we usually see around 100k and below. All stages of investors are generally pretty up front with the size of checks that they write.Hopefully you’re getting an introduction from a previous founder they’ve invested in, or a mutual contact that can fill you in on how the investor likes to invest. Because angels might be your first real capital raised after bootstrapping and friends and family, you should remember the overall value that they can bring to your company. Angel investors can not only bring in capital, but also expertise and industry connections in early funding.
Think about it. If you’re building an enterprise software as a service, or a SAS company, it would be great if your angel investor had ties with other enterprise SAS companies. For example, Salesforce, SAP, or an enterprise you’re going after. The connections and expertise this investorwould have in the industry would be extremely valuable to you at this stage. You’ll hear us say this a lot throughout the course, that you should always be thinking of your next round, not just what you’re currently raising. The investors you bring in early on can set the path for investors you bring in later. So what are angel invetors looking for when they invest in companies?Product, huge market opportunity, and a fast-growing, scale-able business.
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In other words, angel investors are looking for solid founders, a product that addresses a hugemarket opportunity, and the potential to be a fast-growing, scale-able business. In what stage should you start pitching angel investors? Anywhere between the friends and family stage and the seed stage of your company. As a precursor, you should think about funding rounds in context of milestones.Your friends and family round is the idea phase. You’ve done some early building and have earlydata points to support your thesis.
Your angel round is at the product phase. You need capital to build and take initial product to market and test early product market fit. In conclusion, angel investors can be your earliestsupporters if you’re building a viable product that has great market potential.