Being the purveyor of all things startup associated, I thought it time we took a look at angel funding and specifically, what is angel funding and how to find angel funding? These are two questions I am asked a lot and just about every entrepreneur wants to know the answer to them. So, if you have a startup or an idea for a startup, read on and don’t forget to join our community.
Angel funding is when an investor or investors come into a project, generally at a very early stage and fund the development of the concept through usage of their own funds. An angel investor may come in as an individual or there may be multiple angel investors.
This is in contrast to a VC, who generally will use funds which have been raised from accredited investors, institutions or a fund of funds, however, this is not to say an executive at a venture capital firm cannot act as an angel as well.
The term angel actually originates from the world of theater and is representative of an individual who would make a cash injection into a show which would otherwise have the curtain fall on it and close.
An angel investor would generally look to utilize a number of funding methods either through equity or convertible note.
Ok, so as mentioned above the incentive for an angel investor is of course the return on investment (ROI) but in some countries there are additional benefits which play to the advantage of the angel and in fact reduce the overall risk on the investment.
Take for example Singapore. An angel investor in Singapore which is approved as a “Business Angel” can claim tax deduction on investments through the “Angel Investors Tax Deduction Scheme” They can claim up to 50% of the amount they have invested as a deduction.
That is a serious reduction in risk and in effect reduces the cost of investment while inducing and supporting the vibrant Singaporean startup ecosystem.
Other countries have also rolled out similar incentives such as China in 2017 offering up to 70% to not only business angels but venture capital enterprises too.
So this is the question everyone wants to know the answer to! Where are the investors hiding and how to find an angel investors? So, a decade ago, it would have been quite hard but today, it is a different story.
The once burgeoning startup ecosystem is now in full swing with governments finally realizing the absolute returns a healthy space for entrepreneurs can provide to the economy.
As such, quite a few platforms have come to fruition which will put you in the right direction. We will list some of the platforms for angel investors below but lets look at ways to find angel funding first.
2. Networking on Linkedin Groups
3. In Canada, the Canadian Investment Network
4. Look to your own network, a friend of a friend.
5. Online Platforms.
So, the online platforms for angel investors are by far the most popular means of founders trying to approach an angel investor. Here is a list of online platforms for angel investment.
· Trustedin Trading (this platform)
· Deck Sender
· Angel Investment Network
· Angel MD
· Dream Funded
· Micro Ventures
· My Microinvest
· Our Crowd
· SoGal ( for the ladies )
And there are many more, of course, the majority of angel investors will only look to invest within their own country, where the benefits are the most and the risk reduction is highest through tax incentives, so start there.
So finding the angel investors is only half the battle, so let’s take a look at how to get angel funding.
Let’s look at this in the proper way, it is not easy to get angel funding, there are many factors which are taken into consideration when an angel investors looks at a project. They are as follows:
· Team – is there a team? If so, how experienced are the team? Have any team members got previous startup experience? Is the founder a serial entrepreneur? Has he or the team members got exits under their belts?
· Stage – What stage is the project at? Is it just in the ideation stage or is there significant research and development gone into the project. Is there tech involved?
· Valuation – how have you valued your company and using what method (there are a lot) realistically, angel investments are seriously high risk investments, so they want a big return on investment. Dependent on stage and team, an angel investor may request up to 50% equity in the project and a viable exit plan.
· Be Document Ready – have the required documents ready for him or her. They will want business plans, market research, team bios and any relevant financial information.
· Finally – be nice, no one likes a smart ass know it all. While it is predominantly business, being on a friendly footing and creating a rapport goes a long way. No one will invest with someone they do not like.
Feel free to reach out to me if you have any other questions and if you have a project, don’t forget to list it here on TrustedIn Trading.