By David Kiger
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An enormous first step for getting a small business off the ground is exploring all funding options. Self-financing can be a difficult prospect, and a traditional bank loan is no longer necessarily the best option. But the money has to come from somewhere.
One method that can be a solution is seeking angel investors. These are often wealthy individuals looking to invest in promising young companies and new startups.
Angel investing can be a difficult road. Here are some tips for how to navigate it for an aspiring entrepreneur.
Do some digging
Some research is in order in looking for angel investors. The Wall Street Journal advises that these investors will want to know the ins and outs of a prospective business, so the entrepreneur should study what kind of investors to target.
“Be thoughtful in approaching potential investors,” the Journal writes. “Biotech investors, for example, don’t want to hear about a clothing manufacturer. A scattershot approach is likely to turn them off. Industry associations, local trade groups or, in some states, business-incubator centers can help point to potential angels.”
Investors also can work in angel networks, according to the Journal: “These provide due diligence, extra research, access to potential deals and shared expertise that one person operating alone generally doesn’t have. For instance, one member of an angel group might have background in a particular industry or the know-how to set up deal terms, sharing that knowledge with the other investors.”
Where to look for these angels? A story by The Balance includes recommendations for the Angel Capital Association website, along with the local Chamber of Commerce, attorneys and banks.
Different kinds of angels
The phrase “angel investor” might bring to mind an image of a tycoon that plays with investing like a board game. But there are a variety of people that can qualify. Todd Vernon, CEO of VictorOps, analyzes several such types in a story for Inc.com.
First, there are family investors, relatives that just want to help. These are Vernon’s “least favorite investor,” he says, “because the investment is totally emotional and personal.”
The relationship investor is someone who is familiar with the entrepreneur through previous business dealings, Vernon writes. There’s a track record there, and an additional benefit: These investors can be “wildly supportive in terms of finding employees and other resources,” he says.
Among the other types Vernon describes:
Idea investors: These are ideal, he writes, because of their familiarity with the business concept. “Their investment is based on the idea and there is little emotion around the table (always a good thing),” he says. “If you can get them onboard they can open doors into partner relationships and give good advice.”
Once-removed investors: As the label implies, these are not direct contacts, but connections through a relationship or idea investor. “They likely don’t know you, and don’t have a clue if your idea is good or bad,” Vernon says. “They trust someone else to bring them successful investment opportunities.”
What they’re looking for
An entrepreneur’s big idea may not be enough for an Go to the full article.
Source:: Business 2 Community