Looking for an Angel Investment Network? 6 Things Startups Need to Know
When it comes to startup funding, everyone knows that VCs aren't the only game in town. Angel investors and angel investment networks are an important part of the business ecosystem, and they bring a unique perspective to the table.
When it comes to startup funding, angel investors are often seen as the Holy Grail. And it's no wonder why; angel investment in Scotland almost doubled in 2021 compared to 2020. So what is it that makes these elusive creatures so special? In a word: growth.
With the valuable support they offer, startups can gain the financial security and expert advice they need to get a jump start on their success, scale up and grow.
So what do startups need to know about angel investors?
What is an angel investment network?
Angel investment networks provide a way for startup companies to connect with angel investors - individuals who are willing to invest money in new businesses in exchange for a stake in the company.
Angel investors typically provide seed funding. That is, the first round of investment that a startup company needs to get off the ground, before Series A&B funding. In return, they get equity in the company, which can be converted to cash if and when the company is sold or goes public.
Angel investment networks provide a way for startups to find angel investors and vice versa. For startups, this can be a valuable source of funding; for investors, it's an opportunity to get in on the ground floor of promising new businesses.
The difference between angel investors and venture capitalists
When it comes to startup funding, there is a lot of confusion about the difference between angel investors and venture capitalists. Both are interested in investing in early stage companies and you’ll need to perform a winning pitch to interest both of them, but there are some key distinctions between the two.
Angel investors are typically wealthier individuals who invest their own money, while venture capitalists are firms that pool money from many different sources. Angel investors tend to be more hands off than venture capitalists, providing only advice and mentorship rather than actively working to grow the company.
Venture capitalists, on the other hand, often take a more hands on approach, providing not only funding but also strategic guidance. As a result, startup founders need to carefully consider which type of investor is right for their business.
How much do angel investment networks invest In?
The amount of money that angel networks invest in startups can vary widely.
Some angels are looking for quick wins and are willing to invest small sums of money into a larger number of companies. Other angels may be more risk-averse and will only invest large sums into a few companies.
In general, most angel investors are looking to invest somewhere in the range of £10,000 to £100,000 per startup. However, there are always exceptions to the rule and some angel networks may be willing to invest more or less depending on the specific situation.
Your Startup stage also plays a role
For Startups in their very early stages, it makes little sense for Angel investment networks to invest a great deal of money.
First, you'll have to accept the original investments that they offer and do the best that you can with them. Following that original investment, if you have been successful or impressed your angel investor, you may receive another cash injection to expand either your product or service line or your workforce.
Ultimately, it all comes down to what the angel investor is looking for, their experience working with your startup and how much they are willing to risk.
6 green flags that investors look for in a tech startup
What do angel investors look for?
Angel investors are an important part of the startup ecosystem. They provide much needed capital for early stage companies, and they can also offer valuable advice and mentorship. But what do angel investors look for when they are considering investing in a startup?
There are a few key things that angel investors look for in a startup.
One of the most important things that a startup can do to attract angel investors is to focus on financial health. A company that is in good financial shape is more likely to be attractive to angel investors for a number of reasons. First, it indicates that the company is doing a good job of managing its finances and is not at risk of running into financial difficulty in the near future.
There are several key indicators of financial health that angel investors look for, including cash flow, profitability, and burn rate. A company with strong financials is more likely to weather the ups and downs of the startup journey and ultimately be successful. That's why financial health is such an important factor when browsing angel investment networks.
First, they typically have networks of contacts in their industry that they can rely on for information and advice.
Second, they usually have a better understanding of the inner workings of their own industry, which gives them an advantage when it comes to evaluating potential investments in startups.
But perhaps the most important reason is simply that they're more likely to be familiar with the companies and the products in their own industry. After all, it's easier to get excited about an investment when you actually understand what it is that the company does.
So while angel investors may occasionally venture outside of their comfort zone, it's typically not for very long. They usually stick to what they know best: their own industry.
Strong teamwork and a clear vision are essential for any startup looking to attract angel investment.
Angels are typically high-net-worth individuals who invest in early-stage companies, and they tend to be very selective about the companies they choose to invest in. As such, it's important to make sure that your team is cohesive and that your vision is clear from the outset.
An angel investor wants to see that you have a solid plan for how you're going to grow your business, and he or she will also want to know that you have the right team in place to make it happen. By demonstrating strong teamwork and a clear vision, you'll increase your chances of attracting angel investment and taking your startup to the next level.
Viable business & financial models
Any startup looking for funding knows that a solid business model is essential.
This includes everything from identifying the target market to outlining the marketing strategy to designing the product or service. A good business model should be clear, concise, and easy to understand. It should also be realistic and achievable, but most importantly, it should be credible and convincing.
A financial model of your company should be just as clear, straightforward and impressive. That’s why having a bespoke financial model for our company is imperative as they highlight your startup’s personal strengths and weaknesses.
After all, angel investors are risking their own money on a new venture, so they need to have confidence that the company will be successful. If a startup can present a viable business & financial model, it is more likely to attract funding from an angel investor.
Big market & growth potential
They're also looking for a market with potential - a big market that's growing quickly. And of course, they're looking for a competitive edge - something that will give the startup a leg up on the competition.
In general, the larger the potential market for a startup's product or service, the more attractive the startup is to angel investors. After all, angels are looking for companies that have the potential to generate high returns on their investment, and a large market is essential for achieving that goal.
So if you're hoping to attract angel investors to your startup, make sure you've got a large potential market for your product or service.
You can’t bluff an angel investor. They are experienced professionals in their respective industry and likely have a history of success from investing in Startups just like yours.
So be honest about the difficulties your business might face, but make sure that you provide a solution.
Being the leader of a flexible business that can pivot with changing markets is one of the most enticing features any Startup can offer. You can’t hide away from your problems in real life, so don’t brush them under the rug when you pitch to investors.
Show them that you understand the markets well, but that you have a plan A, plan B and plan C to deal with the situations!
Our advice for angel investment networks
There are certain things you can do as a professional entrepreneur and certain things you can’t. Knowing the difference between the two is the path to success.
You can bring together a cohesive, dedicated team around you. You can build plans ahead to navigate the difficulties of your chosen industry. You can find a market with massive growth potential for your products or services.
But building a strong financial case? That’s something best left to a professional.
Outsourced CFO services build bespoke financial models, clean up your financial health and impress investors with your numbers. Their data driven logic and due diligence can drive angel investors to the point where your startup looks too appealing not to invest in.
Contact one of our finance specialists today to learn more about the scalable CFO services that we provide. Remember to check out our School of Startups. It’s the last source of finance guides, tips and tricks that you’ll ever need, all collated from experienced CEOs and professional entrepreneurs!