Angel investors invest in early stage or start-up companies in exchange for an equity ownership interest. Angel investing in start-ups has been accelerating. High-profile success stories like Uber, WhatsApp, and Facebook have spurred angel investors to make multiple bets with the hopes of getting outsized returns.
Here are my thoughts on frequently asked questions from entrepreneurs about angel financing.
1. How much do angel investors invest in a company?
The typical angel investment is $25,000 to $100,000 a company, but can go higher.
2. What are the six most important things for angel investors?
Here is what angels particularly care about:
- The quality, passion, commitment, and integrity of the founders.
- The market opportunity being addressed and the potential for the company to become very big.
- A clearly thought out business plan, and any early evidence of obtaining traction toward the plan.
- Interesting technology or intellectual property.
- An appropriate valuation with reasonable terms.
- The viability of raising additional rounds of financing if progress is made.3. What do angel investors like to initially see from an entrepreneur?
- A clearly articulated elevator pitch for the business.
- An executive summary or pitch deck.
- A prototype or working model of the proposed product or service (or at least renditions).
- Early adopters or customers.
4. How long will it take to raise angel financing?
It’s my rule of thumb that it will always take longer to raise angel financing than you expect, and it will be more difficult than you had hoped. Not only do you have to find the right investors who are interested in your sector, but you have to go through meetings, due diligence, negotiations on terms, and more. Raising capital can be a very time-consuming process.