September 25, 2011
Investors who put their own money into start-up businesses or businesses ready to expand are known as “angel investors.” Typical investments will fall between $5,000 and $500,000. The terms of the deal will entitle the investor to a profit once the business becomes successful or sells to a larger business.
Venture capitalists get involved with businesses that are already established and have already shown their ability to be profitable. Since most angels invest in the seed stages of the business without any proven success, they take on a lot more risk.
This is where the term “angel” comes into play. These investors are angels coming to the rescue of unproven businesses that other investors will not take on.
What may be surprising is that angels often invest for reasons other than turning a profit. There are four main reasons they invest and three of them are not directly profit related. Let’s take a closer look at these four reasons they invest to get an idea of what happens in the mind of an angel.
#1: Personal ties to the individual entrepreneur.
Angels are faster to invest in people they know and trust than complete strangers. They may invest in friends and relatives or people who those friends and relatives know and trust. They may also be willing to invest in colleagues or professional acquaintances that they respect.
This is why networking is so important to every entrepreneur. Personal relationships can lead to substantial investments.
#2: Agreement with what the company or entrepreneur stands for.
If an investor really believes in an entrepreneur’s mission or in what the company stands to do in the future, they are more likely to put their money on the line. They love the idea of supporting things they believe in and getting into the action of something unique right from the very start.
#3: The Excitement of the risk.
If you could really go inside the mind of an angel investor, you would experience extreme excitement when a good investment is brought before them. It is this excitement or high that fuels their desire to make these very risky investments. There is just something so alluring about investing in a new or struggling company and taking it to the next level that really gets them going.
#4: Potential for extreme return of investment (ROI).
While angels tend to be thrill-seekers who need risky investments to get their blood pumping, they are also professionals who want to make a profit on their investments. They want good returns just like any other investor. They just take more risk getting to them.
The first investors to get into the action are often the ones who make the biggest profits when things go right. Angel investors know this!
Now that you know at least some of what may be in the mind of your angel investor, you can use this knowledge to guide your pitch to them. Develop your presentation and business model according to these four motivating factors.
How Do You Get Capital from an Angel?
Dave Lavinsky from Growthink is the go-to thinker on angel investors. He has created a guide that takes you through the process of finding, pitching, and working with angels one little step at a time.
If you are interested in know more about this, click here: Click here to raise capital from angel investors.
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