How do angel investors work?

Wanting to finance my small business start up, by because I'm fairly young I don't have a lot of money saved and don't have previous work experience out side of some summer jobs I think it may be difficult to secure a loan from a bank. That being said I'm trying to research so called angel investors and had some questions 1. What's the best way to get in touch with local investors (angels or otherwise) that are not part of a bank 2. Are there any risk with going with a non bank investor 3. Can I trust an investor with my business idea? 4. What's to stop them from taking my idea and implementing it or a similar version on their own? Thank you all for your help!

Smallbusiness | 👁 692 | Posted 2018-02-28 | Share on Facebook | Twitter | Google+

| Modified: 2018-02-28 | Author:


Bobello10000 2 years ago

You e been so helpful one more question if you don't mind. Thinking about hiring someone to do a business plan for me because I'm not entirely sure how to calculate the numbers my self. Know anywhere reputable to get that done?

audreyality 2 years ago

You follow or message this guy on Twitter: @Jason. He's even put out an open call for reviewing--and more importantly providing feedback on--startup whitepapers. He's written a book, but I have not read it myself. I think connection or at least advice from Angel investors is a good idea.

Bobello10000 2 years ago

Thank you for hitting all the points! You mention finding the right investor is very important. Could you elaborate on what qualities I should look for in order to find the right one? Or is it like you said like liking a spouse and it'll be more of a personal connection that you can't really describe over the Internet?

Bobello10000 2 years ago

I did just get a job in hopes of saving up for some kind of collateral at a bank if I can't find an investor, however it would take a long time for me to build up any significant funding with 11/hr :/

Bobello10000 2 years ago

Thank you for the response! From what I've seen online this is kinda the agreed upon method of doing things. Start a business if it does mildly successful things investors will be more likely to come. I would prefer to do it that way but I can't start the business without some form of loan or investment because I don't have enough money to set up the initial store front etc.

mchoward 2 years ago

Agreed with this. It may be best to look for an incubator or accelerator, both private or public. Business schools at many universities will have sometype of programs intended to help very early stage startups. They are usually happy to offer advice and maybe even provide regular mentorship. They likewise will often have some type of funding, whether in the form of competitions or outright grants. Also, the big movers in university business schools will most likely know the big movers in the local community. If you are able to impress them with a solid startup idea and evidence that you can make it succeed, they can (more than likely) introduce you to the people to make your idea work (i.e. relevant angel investors in the community).

noctrnalsymphony 2 years ago

I always wonder how many of those investments go well for the entrepreneurs. They don't show you nearly as many "where are they nows" as they do businesses that got investment. The negotiation process on television is off the wall bananas compared to a regular negotiation without famous personalities or cameras. The pressure seems intended to coerce entrepreneurs into making bad choices for ratings on the show. Still love complaining about the entrepreneur's valuation of their company though :D

j1donovan 2 years ago

Look it really depends on what youre trying to do. If youre focused on a software based company or on the other side of a spectrum- an asset-heavy kind of business, theyll require different approaches to getting your business started. It seems like your primary focus is simply just getting started. And for good reason it should be. In order to start approaching angel investors, or any investor, you should have clear objectives why you need their funding. In most cases youll have to do some initial experimenting on your own to show initial traction (product-market fit). Starting your own business or startup really is no different from a real life experiment with a hypothesis and evidence-based approaches. If you want to get investors excited about your idea youll have to show that people want want youre making. So as much as looking for people to fund your business seems like the proper way to start, it really isnt. It should be about customers first. Do everything within your power to get traction first and I promise you looking for money (which is really really really difficult in the first place) may be a tad bit easier with a real business that has real customers. Angel investors really can be anyone, family or friends or friends of friends. Depends also what you want from them: 1) a former professional in the industry with a lot of mentorship experience and connections or 2) a hands-off passive investor. Its all up to you once you have initial signs of traction and a clear purpose behind the funding you need. Id generally stay clear about the idea that these folks are going to steal your idea in anyway cause if that were the case, someone would have already instituted your idea and you wouldnt be here asking for help on getting your business started in the first place. 99.99% of people dont have the initiative or inspiration behind your idea to make it their own venture. Good luck!

HaiKarate 2 years ago

The biggest risk of an angel investor is giving away a huge chunk of your company. I was watching Shark Tank the other day, and some lady was looking for a shark to invest, but had already given away 50% of her business to two other angel investors. She had an offer to sell 33% of her business, but that would have left her with 17% of the business that she built with her own sweat equity. IIRC, she ended up selling 30% and keeping 20%; still a very small cut. You want to hold off on outside investment for as long as possible. You also want to have a revenue stream going before you talk to any investors, because that's how they are going to value your business.

TVanthT 2 years ago

There are a million ways to start a business. You mentioned that you are inexperienced, unfortunately this is enough for 99% of angel investors to turn you down. It sounds like you still need to learn a lot about business before you can offer to start one. Something that worked for a few of my friends in a similar situation was looking for competitions and business accelerator programs. Often universities have these, but there are also many government funded ones. During these competitions and programs you will be given mentorship and advice. And if you are lucky/good enough to win, then you will have a much easier time convincing investors to get out their wallets.

geeimus 2 years ago

I get what you're saying but I'd never ask family for money but I've helped multiple clients and friends raise 7-8 figures from VCs. Asking family is either offering them a favor or asking for charity. I've done the former with start-up friends. The problem is you should never do the latter. If you can't convince professional investors to back you, don't ask grandma.

TaylorTheyTheirsThem 2 years ago

What's the best way to get in touch with local investors (angels or otherwise) that are not part of a bank angel.co allows you to search by geography. aside from that, linkedin or just googling 'city' + 'angel investor' should yield people in your area. or you could try to get an introduction from others in your area who have raised money, if you know any or can meet any. Are there any risk with going with a non bank investor Sure. Choosing an investor is similar to choosing a spouse. Choose wisely or they can make your life a living hell. Can I trust an investor with my business idea? Any reputable investor, yes. Generally speaking, you shouldn't be too worried about this anyway. Good ideas are plentiful. Someone 'stealing' yours is not likely to be the reason you fail. What's to stop them from taking my idea and implementing it or a similar version on their own? Ultimately, nothing. But nothing will be stopping anyone once you release it. Go to ProductHunt -- nothing is stopping you from stealing all of those ideas. Worry about executing well and finding good people to work with (like investors). Stop trying to protect your idea. Note: if you have found a cure for cancer, the above may not apply. Otherwise, it does.

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