Angel investors are usually wealthy entrepreneurs, that invest their private money into a startup. The investment can be a single lump sum or long-term support. The goal of angel investors is usually not to a high return on investment but to support a startup and an entrepreneur that they personally believe in. Their reward for investing is usually convertible debt or ownership equity. A lot of angel investors form so-called angel networks or angel groups, which consists of several angel investors and sometimes an investment advisor that pool their money and knowledge in order to make smart investment decisions.
Why angel investors?
Angel investors are often entrepreneurs themselves, which means that they can offer advice to your startup. Their valuable insights can help you tackle difficult business situations and make use of all your potential effectively.
Furthermore, getting in contact and getting funds from angel investors is rather uncomplicated compared to other forms of funding. Every major city has an angel network that you can get in touch with. These networks offer you the possibility to get to know different investors at a time, to compare them and to find the most suitable for your business. You can simply expect the funding to arrive as soon as you found a suitable angel investor that is also interested in supporting you. There are usually no long waiting period; the due diligence by angel investors is usually pretty fast because they are most interested in supporting you as a person and as an entrepreneur, rather than expecting a high return on investment, which would require extensive and time consuming research and analysis.
It also lies in the nature of angel investment that the funding you receive is not attached to repayments or interest. What angel investors expect as a return is usually ownership equity or convertible debt, which is much easier to provide for a startup than cash.
Furthermore, other than venture capitalists or banks, an angel investor is personally invested in your company. He spent his own hard earned money on your business and is therefore extra motivated to see it prosper. An angel investor will be very committed to helping you succeed and to giving you valuable advice.
This personal commitment, however, can also be a disadvantage for entrepreneurs. The personal commitment to your company will cause them to monitor very closely how their money is spent. This might lead to conflicts between the two parties, entrepreneurs might feel forced to move into an unwanted direction.
Furthermore, because angel funding comes from private people, the support is usually not long-term. Rather, it is a single lump sum. This sum will greatly support your business but for the future you will have to keep looking for additional support.
A lot of professional investors, especially a lot of venture capital firms also provide structural support to startups through mentorship programs, trainings and seminars. Usually, being individuals, angel investors cannot provide very much structural support. Very experienced angel investors (archangels) will probably have a well established network of mentors, trainers and advisors yet would be unable to yield support as extensive as venture capitalists.
Angel funding can mean fast money and good advice if done correctly. Just keep in mind that the investor will probably want to influence your business decisions.
BHIVE managed to raise angel funding successfully from Raghunandan G (Co-founder, TaxiForSure), Rajesh Rai (Co-Founder, VentureCity), Arihant Patni (Managing Director, Hive Technologies), Sanjay Mirchandani (Owner, Mirchandani Group), and Arun Narayan (Director, UK India Business Council). Learn from Shesh Paplikar, our co-founder, how to get angels aboard.
The first step for Shesh was to be a BHIVE investor himself.
Invest your personal money into founding the startup and into getting it running, getting the first customers and employees.
Next, he proved his business to the general public. Acquire your first customers, talk to people about your business, make them excited about it. If people are willing to pay their hard earned money on your produc,t you have a working business idea, which is the most important step in running a successful company and raising funds.
Third, Shesh was lucky that one of BHIVE’s advisors was also an investor, who put him in touch with the local investors’ community thus could start building the investors’ network.
Even if you are not acquainted with an angel, they are pretty accessible. Get in touch with the local angel network, attend funding and startup events, talk to investors. Even if the conversation will not result in funding you will still get to practice presenting yourself and your startup, a very valuable skill when looking for funding. Moreover, you will gain valuable insights into how funders think, what they look for in a business and you will learn to take a more objective look at your startup.
When building your investors’ network. do your research! Find out which angels are experienced or tend to invest in what business sector and concentrate your efforts on those that fit your profile. Make your approach to the investors as personal as possible. There are hundreds of entrepreneurs who would like this person’s money. Properly researching and approaching them will greatly increase your chances that the investor will remember you.
The benefits of your first round of angel funding will not stop after you received the money. You will draw the attention of influential people, archangels and venture capitalists. They will follow the trend and are more likely to provide bigger amounts of funding in the future.
As for BHIVE’s future with the help of the angel investors we will be able to expand, grow bigger, provide better customer service through constant learning from experience
What to keep in mind:
Angel investment is a great way of raising early stage funding. You will receive money and probably some kind of advice from an experienced entrepreneur. The money and the network of (angel) investors that you build in your quest for funding will greatly support your startup. Just be aware that angels are personally invested in your business. They will be able to support you but they will also want to have influence in your startup’s development.
BHIVE provides both the space and the ecosystem necessary to take your ideas to the next level. Through our focus on community we are able to connect you to angel investors, venture capitalists, successful entrepreneurs, advisers, mentors and successful startups.