Angel Investors

It is preferable to use connections to access investors rather than blindly contacting individuals or submitting online submissions. Doing so can negatively impact the startup's ability to be funded.

Where do these connections come from? Referrals can come from anywhere, which is why it is important to establish and maintain a strong and robust network. Other entrepreneurs can give guidance regarding angel investors they sought and individuals with whom they succeeded or failed. References may come from individuals providing services to the startup, such as lawyers and consultants. Finally, as already mentioned, angel investors the team has previously worked with may be able to refer others. It is important to cultivate these networks early and to work hard to maintain them. One approach is to go to angel investors early for advice, well before asking them for funding. If the team has followed their advice to good effect and have developed the company further, the investors will have more trust in the team and would be more likely to invest .

There are multiple tips to keep in mind when contacting an angel investor. It is important to be assertive but respectful. Oftentimes, there will be a limited amount of time to discuss key aspects of the product, so it is important to have the "elevator pitch" ready. There are six key points that all investors are listening for. The first is the concept: what sort of novel technology or service will the company provide? The second is the current market size as well as the potential for future growth. Third, investors will be interested to learn more about the current management team, their credentials, and their track record of success in order to assess if these individuals can take the company to the next level. Fourth, investors will be keen on understanding the business model, including the projected costs and need for funding. Providing this information in the context of a range of sales, revenue, and cost estimates helps build credibility with the investor, because they can see the team has considered various nonoptimal scenarios for the company as well. Fifth, all investors want to know how they will make their money back; that is, what is the exit strategy? And finally, investors want details regarding the valuation of the company, which will be relevant when structuring a financing deal. Having these details handy will foster trust with the investor as they can see the team has done due diligence regarding the future of the company and they will be more likely to invest in the team and their product.