05: Targeting Your Angels
Narrowing Down Individual Angels
Networking is a crucial part of finding angel investors. There is no such thing as too much networking, so don’t hesitate to get out there and meet potential investors. It’s not always about selling your business, either. Building personal relationships with potential investors and the other people you meet while networking will pay off in the future. Part of effectively building professional relationships includes always being positive and polite, and dressing to impress. You only have one opportunity to create your first impression, so make sure you are ready for it.
Unfortunately, you will hear many potential investors tell you “no.” It doesn’t mean your business isn’t a good one, it just means that for some reason your business was not the right fit for that angel’s investment. If someone turns down investing in your company, always ask if the person knows an angel that would be interested. If the angel is receptive, you can also ask why they said no and use their feedback to further perfect your pitch.
Another avenue to consider is asking your bank if they have any connections to angels. As the bank has an interest in your venture’s financial success, they may be willing to share access to their network of investors with you.
Narrowing Down Angel Groups
Angel groups are becoming more popular but are constantly forming and rearranging, so you have to constantly keep an eye out for a new opportunity. Some websites have developed an angel group matching service, so that is an option to try.
Another option is to attend an investment forum. If you live near a major city, you can likely find an investment forum nearby. Investment forums are similar to angel groups in that many investors attend in order to learn about promising new companies to invest in. These events can often attract advisors, customers and other strategic partners along with the angels. The forum may also host workshops for investor education, and these may be useful for you to attend in order to get into the mindset of an investor and see what they are looking to learn.
An accredited investor is one who meets specific criteria as defined by Regulation D of the Securities Act of 1933. The angel investor must have an individual net worth (either alone or joint with their spouse) that exceeds $1 million at the time of investment, or have an annual income that exceeds $200,000 (or $300,000 if joint with spouse) for the two preceding years and reasonably expects the income to remain stable in the current year, to be considered an accredited investor. If your investors are accredited, then you do not need to create a PPM to go along with their investment. The purpose of the PPM is to give the investor full disclosure of the risks of the investment. But an investor who qualifies as an accredited investor can bear the risk of a complete loss of their investment and is presumed to be a sophisticated investor. Regulation D makes it possible for entrepreneurs to avoid the costs of preparing a PPM by pairing them with investors who are sufficiently positioned to assess the merits of the investment independently and to bear the costs of an investment that goes sour.