Venture Capital Firms

Angel Investors

If you are looking for small business capital, an angel investor could be a good idea.

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In order to attract this type of investor you will want to start by thinking like a prospective investor. To do this put yourself in their shoes, what would encourage you to invest in a business? What would you need to know?

Generally, there are a couple of primary factors, which are management and markets. Angel investors are interested in seeing that you have a service or product that reaches a large enough market to show good returns. A small business seeking angel capital should have a realistic expectations of revenue in the range of several hundred thousand dollars annually and up to several million dollars, within five years.

Venture capitalists will look for companies who project $50 to $100 million in earnings over the same five-year period.

In addition to requiring a specific level of revenue, angel investors will also search for businesses with capable and credible management. You must show yourself to be successful and experienced in other ventures. Potential angel investors will also need to be confident in key operating management or personnel in your business.

Another thing an angel investor will want to know is how good your barriers are in the industry. Your new business will be more attractive if it is difficult for new competition to come onto the scene. High profits and revenue are more likely when you have fewer competitors.

Angel investors also screen new businesses based on their location. It usually just makes good sense to invest in a business that is close by as this allows for more frequent interaction. Many angel investors like to offer guidance and assistance as a company progresses from start up to full-grown company. Statistics have shown that 70% of angel investors will choose a company within a 50-mile radius.

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One very important thing angel investors seek is the potential for a liquidity event such as a public offering or an acquisition. These are the final events that will offer a return on investment. To put it simply an angel investor is more concerned with the future liquidity of a potential small business.

All the best,

-Peter

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