Having a precise plan and understanding your startup’s strong and weak sides can significantly influence the development of your business at the early stage.
If you need financial support to get off the ground in your ventures, consider searching for an angel investor in your area.
What Is an Angel Investor and Accredited Investors?
Angel investors are individuals with a decent sum of money in their pockets, a small fracture of which they are willing to invest into a startup.
Angel investors are personally interested in the startup they invest in and expect to receive a company stake as a reward for their early support.
In essence, anyone can become an angel investor. Even if you hand out a couple of hundreds to your friend’s startup, you still can be regarded as an angel investor.
However, not all angel investors fall into a category of accredited investors. You have to meet the requirements of the Security and Exchange Commission (SEC) to become “accredited.
” The commission determines an accredited investor as someone who:
- owns more than $1 million together with his/her partner or individually;
- has accumulated over $300,000 together with his/her partner, or $200,000 individually in each of the past two years;
- has professional credentials issued by a business school or other accredited educational institution. Those credentials include financial security licenses of Series 7, Series 65, or Series 82.
Accredited angel investors are experienced and knowledgeable enough to handle the risks that come with putting seed capital in a startup.
Because of the risk of losing funds, angel investors usually don’t give away more than 10% of their portfolio. The amount of the investment typically varies from $15,000 to $250,000 or higher.
Most angel investors prefer to keep their identity unknown. There are some exceptions when angel investors form groups united under LLCs and other entities. Those can usually be found online.
Internet Platforms as a Tool
Some entrepreneurs look for angel investors amongst their friends and relatives. Others search online for individual angel investors. However, the easiest and most efficient way is to use an angel investment platform.
One of the most popular startup investment platforms is AngelList. AngelList represents one of the largest startup communities, with over 100,000 successful startup deals and more than $1 billion invested.
It was created to support tech startups by connecting them to tech specialists and angel investors.
Another big technology investment platform is Tech Coast Angels (TCA). Established in 1997, the platform invested over $250 million in more than 450 companies.
With a team of 450+ experts, TCA assists startup owners in the field of IT, software, biotechnology, and life science.
Speaking about biotech, Wefunder is one of the biggest platforms in the investment field. Wefunder has helped over 1,500 startup owners and raised more than $290 million in investments.
People at Wefunder are passionate about startups that combine technology and biology.
Search for Angel Groups
Angel investors can be divided by group type. There are five types of angel investment groups:
- revenue-based financing;
- impact investing;
- life sciences.
Alumni/university-based groups are angel organizations that carry out their activities together with a university or college. Besides financial support, they provide startup owners with mentorship, professional connections, and educational programs.
Revenue-based financing groups provide seed capital for small or startup companies in various industries.
These groups carry out their activities through revenue-based loans, but some of them also include angel investment services. Founders First Capital Partners is one example of such organizations.
Cleantech groups are investment groups that provide management expertise and seed capital to early green energy startups.
Impact investing groups are groups that help address social and environmental issues. They strongly support startups that are based on environment protection, education system improvements, and human rights.
They also embrace startups founded by women, veterans, and people of color.
Life sciences groups are investment companies that primarily focus on scientific research. They support startups financially, as well as provide them with necessary tools such as access to software, data, and laboratories.
|Name of the company||Group type||Investments made|
|Founders First Capital Partners||Revenue-based financing||$109 million|
|Clean Energy Venture Group||Cleantech||over $500 million|
|BELLE Impact Fund||Impact investing||$20 million|
|HealthTech Capital||Life sciences||over $900 million|
Know Your Startup Inside and Out
Before making a startup plan, you should identify your target audience. Define your end consumers and your marketing strategies. It might involve determining their geographic location, age, socioeconomic status, and gender.
To get investors interested, you want your startup plan to be as informative and intriguing as possible. Try to add a description of your products and/or services, marketing plan, financial plan, management & operational structure, and market research to your overall plan.
By forming a culture of constructive communication and initiating feedback within the team, you will have a better understanding of your startup.
One way to do so is to outline your team’s strengths, weaknesses, opportunities, and threats (SWOT analysis).
Know Angel Investors Location
Search for angel investors who invest in your country or area. Some investors cooperate only with startups that are located near them.
The biggest embassy of angel investors is located in the USA, with more than 250,000 active angel investors. Houston is one of the most prospective cities for startups in the US. Learn how to find angel investors for startup there.
Every year, about 30,000 companies receive support from American angel investors. The most popular angel investment states are Texas, California, and Florida. To compare, it’s estimated that Canada has no more than 50,000 angel investors.
Angel investors are gaining popularity in other parts of the world. According to EBAN, the United Kingdom has over 9,000 business angels who on average invest $2.4 million per year.
European angel investors have previously handed out $9.5 billion to startup companies in one year. In 2020, 341 startups from India were funded by angel investors.
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