An angel investor is somebody who provides capital for a business startup, often in return for convertible debt or ownership equity. Angel investors can be individuals, groups, or organizations. In this blog post, we will discuss the different types of angel investors and who they are likely to invest in. We will also provide tips on how to find an angel investor for your startup!
Types of Angel Investors
1 . Family Investor
There are many different types of angel investors, but they all share one common goal: to invest in businesses that have the potential to be successful. Family investors are one type of angel investor.
These are individuals who invest their own personal money into businesses, typically startups, that they believe in. Family investors may be motivated by the potential to make a profit, but they also often have a personal connection to the business or the entrepreneur.
For example, they may be related to the founder or have a strong belief in the company’s mission. Family investors can provide both financial and emotional support to a business, and they can be a valuable asset to any startup.
2 . Relationship Investor
When starting a new business, it is important to have a strong network of support. One type of support comes from what is known as a “relationship investor.” A relationship investor is somebody that you have previously worked with or who is already a business friend. Even if they don’t fully understand what your company does, they have trust in you based on past interactions.
Because of this, they are more likely to invest money into your company with the hopes of seeing a return. However, even if things don’t go as planned, you won’t lose their friendship. Relationship investors can also be extremely helpful in finding new employees and other resources that your company may need. Consequently, it is beneficial to have at least one relationship investor when starting a business.
3 . Idea Investor
The space your company is targeting is very important to the Idea Investor. They feel that if you can get them on board, they can open doors into partner relationships and give good advice. The idea investor is focused on the idea and not the emotion of the investment. It is important to convince them that you and your team are the right people to attack the problem.
An influential Idea Investor makes a better early board member of the company. Often, the best way to secure an investment from an Idea Investor is to show significant progress in your industry. This type of investor is interested in putting money into a company with a solid plan and a clear vision for success.
Innovation and creativity are also key factors in getting an Idea Investor to invest in your company. If you can show that your team has what it takes to succeed, you will be more likely to receive funding from this type of investor.
4 . Once Removed Investor
The Once Removed Investor is an important part of the Angel Investor ecosystem but can be difficult to connect with without a solid introduction from either the Relationship Investor or the Idea Investor. As their name suggests, they are one step removed from the actual investment opportunity, and as such, they require a bit more convincing that the investment is worth their time and money.
However, Once Removed Investors can be a valuable source of funding, especially when paired with a strong Relationship Investor or Idea Investor. Because of this, it is important to try to build relationships with Once Removed Investors whenever possible.
5 . Archangel Investor
Before going out and looking for investors, it is important to understand the different types of investors that are out there. One type of investor that can be especially helpful is an “Archangel” investor. An Archangel is a relationship or idea investor that has a track record of success making other angels money.
These individuals are valuable because they typically have a lot of influence and can help attract quality investors. If you can find an Archangel that is excited about your deal, it is definitely worth pursuing. However, it is important to be careful with this type of investor as there are many people who pretend to be Archangels but only offer to connect you with people that have money—for a fee.
If your Archangel Investor is not actually investing his or her own money but simply acting as a proxy for others, take note; this is usually a warning sign. Bottom line: do your research and be cautious when working with any type of investor.
Tips on how to find an angel investor for your startup
1 . Do your research
The first step in finding an angel investor is to do your research and identify individuals or groups that might be a good fit for your company. There are many online resources that can help with this, such as AngelList and Gust.
2 . Be cautious
It is important to be cautious when working with any type of investor. There are many people who pretend to be Archangels but only offer to connect you with people that have money—for a fee. If your Archangel Investor is not actually investing his or her own money but simply acting as a proxy for others, take note; this is usually a warning sign.
3 . Build relationships
Once you have identified potential angel investors, the next step is to start building relationships with them. The best way to do this is by attending startup events and pitching your company to them.
Some other tips for building relationships with angel investors include:
– Get introduced through a mutual friend or acquaintance
– Attend industry events that they are speaking at
– Connect with them on social media
Once you have established a relationship with an angel investor, you can start to pitch your company to them. It is important to remember that angels are looking for companies which they can make a lot of money from, so it is important to focus on the potential return on investment when pitching your company.
Some tips for pitching your company to an angel investor include:
– Make sure you have a well-thought-out business plan
– Focus on the potential return on investment
– Be prepared to answer tough questions about your business
If you can convince an angel investor that your company has high growth potential, then you are one step closer to securing funding for your startup.
4 . Show significant progress
One of the best ways to attract angel investors is to show significant progress with your startup. This could include things like having a working prototype of your product or generating revenue from customers.
If you can demonstrate that your company is making progress, it will be much easier to convince an angel investor to invest in your business.
5 . Have a solid plan
When you are pitching your company to an angel investor, it is important to have a solid plan for how you will use the funding. Angels want to see that their money will be used in a way that will help grow the company.
Some that you can include in your plan for using funding include:
– Hiring new employees
– Marketing and advertising campaigns
– Research and development
– expanding into new markets
Having a solid plan for how you will use funding will show angel investors that you are serious about growing your company.
6 . Be creative and innovative
Angel investors are looking for companies that are creative and innovative. They want to see that you are coming up with new ideas that have the potential to disrupt the market.
If your company is doing something unique, it will be much easier to attract angel investors.
Some tips for being creative and innovative include:
– Thinking outside the box
– Challenging the status quo
– Being open to new ideas
By being creative and innovative, you will show angel investors that your company is worth investing in.
7 . Focus on the idea
When pitching your company to an angel investor, it is important to focus on the idea rather than the numbers. Angels are looking for companies with high growth potential, so it is important to convince them that your company has what it takes to succeed.
Some tips for focusing on the idea include:
– Talking about the problem that your company is solving
– Describing your unique solution
– Explaining the market opportunity
By focusing on the idea, you will show angel investors that your company has what it takes to succeed.
8 . Don’t lose sight of the emotion
It is important to remember that angel investors are people too. They want to see that you are passionate about your company and believe in its potential.
Some tips for staying emotional include:
– Being enthusiastic when talking about your company
– Showing excitement about the future
– Talking about how your company will make a difference in the world
If you can show angel investors that you are passionate about your company, they will be more likely to invest in it.
9 . Find an Archangel Investor that has a track record of success.
One of the best ways to attract angel investors is to find one that has a track record of success. This shows that they know what it takes to invest in a successful company.
Some tips for finding an Archangel Investor include:
– Researching online
– Asking other entrepreneurs for recommendations
– Going to investor events
Next Read: Top 5 Angel Investing Platforms to Help You Get Started