Angel investment is one of the preferred options for starting up your business. Angel investors are successful businessmen, investing their own funds into a potentially rewarding business opportunity. As an entrepreneur, it is crucial for you to choose an investor that can fulfil your specific business needs.
The right investors can add value to your startup, far beyond the capital they bring to your business. You need to be careful in selecting the investors because seed investing is an early stage investment requiring particular skills and experience.
Here are the six important things to consider when screening and choosing the right angel investor for your company:
You should choose investors who have the experience of building, running, or helping startups in the past. They should have a proven record of investing in startups that have been successful in their endeavors. More than their money, their experience is vital, which makes them an invaluable advisor.
Your angel investors should have experience in the same business domain and in-depth knowledge of your industry. If they have achieved success in other domains or industries, they may give opinions on how to grow your business that aren’t applicable in your field. With the requisite experience, they can guide your business through the difficult start-up phase.
Your angel investor should be trustworthy who can keep your company’s confidential information safe without creating problems for you by using that information against you. It is important to choose an investor who gives you not only monetary assistance but also the right guidance and knowledge. A good angel investor is the one who invests in your team along with your business.
3. Risk Taking
The success of your business venture cannot be guaranteed as there are many potential risks that can lead to its failure despite a brilliant idea. It is vital to find an angel investor who is willing to take calculated risks on a rational basis rather than emotional considerations. They shouldn’t be overconfident and they should think differently from the crowd and be willing to learn from mistakes to keep your company going in the right direction.
Angel investors who have been a successful entrepreneur can be very helpful to your business. They have it all to guide and support you to develop a successful business and overcome the challenges that your company can face in the initial stage.
Good business angels are very supportive, helping you in problematic situations. They act as a mentor for you to help you achieve your goals by constantly coaching you and supporting you at every step. They provide time and empathy during your tough times.
These investors have an idea about the highs and lows a new business has to go through before it succeeds. They can give you emotional motivation and help you with their expertise and involvement, ensuring success. They will encourage and challenge you at every step of the way and offer you advice when needed to make you grow as an entrepreneur.
Before you choose an angel investor for your business, you have to ensure that they have realistic expectations about the timeline of the growth of your company and when you achieve your goals. They should even have realistic expectations about how profitable your company will be in the long-term.
Too high expectations can put pressure on your business and make you take risks that can get you off track and not be good for building long-term value of your business. You should select investors who demonstrate flexibility and have reasonable expectations around reporting, communication, and goal-setting.
Angel investors should be patient enough to understand that it takes time to earn profit. They should have the quality of thinking long term and visualizing the bigger picture of your company’s future. Your business angels should be calm and relaxed, and not be the ones who panic and fear to take challenges. It is crucial for them to understand that startups go through highs and lows, and there’s high competition. A good angel investor will remain calm and accept the fact that all new businesses have to struggle in the initial years before they become stable.
When assessing angel investors, you will have to ask them questions about their prior investments, what their expectations are and how much involvement they will take in your business, among other things. You will have to find investors that have the same domain expertise and portfolio companies related to yours.
By considering the above-mentioned points, you will be able to evaluate whether you and the angel investors are aligned and if it is feasible to have a partnership with them in the long-term. Take the help of your network to find the right investors with requisite skills, experience, and funding capacity to get your business global. So, use your due diligence and get the best angel investors on-board!