Almost all companies, regardless of size and stage, need some form of external funding at some point in their journey. If you’re looking at equity financing to fund your company’s growth, then getting the right investors on board can make the difference between poor performance and sustained growth.
Know what you are looking for
Angel investors are individuals who invest their own money in early-stage companies. Typically, angel investors are “high-net worth” individuals with business and sometimes relevant industry experience. Traditionally angel investors were exclusively “accredited”, i.e. those persons that are allowed to invest in private companies without limitations under federal securities rules. However, angel investing is possible for all American investors today thanks to “Regulation Crowdfunding”.
Angels fully understand the high-risk nature of early-stage investments. They go into each investment not knowing that many investments will fail, but if a few are successful, they have the potential to make up for the losses and more. In addition to their capital and experience, angels may also bring useful industry connections.
With angel investors, you can expect varying degrees of participation. Some investors are “silent”, meaning they have no active participation in the day-to-day affairs of a company. Others will ask for a board seat if the investment is considered sizable. And other angels seek more active involvement in a company, ranging from simply adding value to their investment by assisting, to seeking a part-time advisory role. Angel investors can come from all backgrounds and locations, but a large number of “accredited” angels live and invest in the San Francisco Bay area and New York.
Angel investors differ from venture capitalists, or “VCs”. Whereas angels for the most part are individuals who invest very early, VCs are institutional investors that usually invest in a startup company once they have experienced “product-market fit”, meaning they have significant traction and have identified a lucrative customer base to use their product.
14 ways to find investors
There are many ways to find investors, so it’s crucial to identify the right ones for your company. Here are some ideas to get started:
All universities have alumni networks that are full of enterprising individuals looking for promising opportunities from within the group. Most alumni networks organize events, and some even run active angel investing groups. If you’re a college graduate, your own alma mater may be a great place to start. Or, if you have connections to other business schools through friends, family, or colleagues, this avenue can be a potentially lucrative one.
Industry friends and associates
Your professional network may already include potential investors who are active at industry events. Professional networking can provide valuable professional connections that may ultimately lead to an investment. As always, good research is vital, and sites like LinkedIn and AngelList can be helpful here. These platforms can not only help you understand who is connected to whom, but also assist in narrowing down your ideal potential investor in terms of industry experience and preferred industries.
Online fundraising platforms
Online platforms like Republic have democratized angel investing by making it accessible to individuals who wish to make smaller investments. On Republic, you can raise money from hundreds or even thousands of investors, and only put 1 new line on your cap table. The vetting process to get listed on one of these platforms can be rigorous and time-consuming. But if you’re successful, you could gain hundreds or thousands of new investors, and raise up to $1.07 million per year using Regulation Crowdfunding, or $50 million per year using Regulation A+.
Startup communities and events
Investment success is sometimes about getting noticed, and being in the right place at the right time. Attending specialized events where you can showcase your product and company is an excellent way of getting in meeting potential new investors face to face, which can often create more trust. There are many conferences for startups to exhibit or demo their product, including CES and TechCrunch Disrupt. You can also look for local pitch contests to raise visibility for your company and perhaps even win some cash.
When an investor considers an investment, they often look to the founders to better understand their story, background, and vision. Blogging is a great way to tell your story to the world directly. It engenders trust, it shows commitment and vision, and it can inspire the right individuals to step up and follow your vision by taking action and investing. Your blog can live on your company’s website, or third-party sites like Medium or LinkedIn. Your posts may not get thousands of views, but if they get a few views from the right people, it can make a world of difference.
Similar to blogs, social media is now widely regarded as an essential tool for converting followers into customers and investors. Ultimately, investors buy into people, and if you’re active on social media, they can see what you stand for, how you are making the world a better place, and how you are engaging with your community. With targeted advertising and messaging, social media can be a great way to test your market, develop your brand’s voice, gain followers, and attract angels.
Email can be an effective tool for following up with an investor or for sharing some valuable information with an investor who you consider active in your field. Your goal at this stage is to attract their attention and create a relationship rather than soliciting them for investment directly. This can be a very powerful and effective “slow-burn” outreach strategy, so dedicate time to email outreach. Don’t just blast your contact list Offer some free knowledge or white paper, maybe seek advice, create a conversation, and then ask for a meeting once you’ve created some trust.
Apply to accelerators
Startup accelerators are an instant way to expand your network with immediate access to peer and alumni groups, experienced founders, investors, and experts who can coach you through the next steps for your business. Accelerators are available both nationally and locally, so research the program that makes the most sense for your industry and your business. Top accelerator programs, such as Y Combinator, are selective, and you’ll need to put your best foot forward.
Start sharing your product
Investors always want to see your potential. Get your product out there and gather some feedback and testimonials from real users, beta customers and survey respondents to show your proof of concept. Demo at events and conferences, and offer to walk investors through how your product works, as well as how you will make money and grow. Be ready to show how you plan to build your startup into a large company.
Angel investor networks
Angel investor networks pool funds, experience, and connections among angel investors to help angels contribute more to startups for their portfolios. There are typically 4 types of angel investor networks:
Public Angel Networks: any angel investor can join, usually for free, and angels are allowed to browse startups and decide which opportunities to invest in.
Private Angel Networks/Angel Clubs: these are usually member-based organizations and investors normally have to meet certain requirements. For example, some private angel group members need to declare themselves “sophisticated” or “accredited” high-net worths (which explains why they’re private). Some clubs charge subscription fees or may require that an angel make a minimum number of annual investments or minimum investment size, to be a part of it. These clubs usually host pitch contests and other events to source qualified deals to present to investors in their network.
Angel Funds are pooled funds through in which members vote on investment decisions. These types of funds are located throughout the U.S.
Crowdfunding has become a powerful way to raise funding towards a project or specific goal. The idea here is to reach multiple investors, each pitching in whatever amount they like toward a larger goal. We see this in the charity world, in real estate, and now the investment world with sites like Republic.
Your local entrepreneurial community
Sometimes you don’t need to look further than your own backyard. Depending on where you live, there may be numerous events, workshops, and even happy hours that can lead you to your next investor. An investor isn’t just a paycheck - they’re members of the community and your neighbors may be some of your best resources and advocates to help you succeed. So it’s often worth the time to search around for local business or angel investor groups.
Connect with mentors
No one gets there alone, especially when growing a business. In the startup world, mentors can play a huge role in helping your growth. In addition to providing advice and support, mentors can help connect you to their network of investors. Ask your mentors who they think might be interested in funding your idea and see what connections they can make on your behalf. If you don’t yet have a mentor, reach out to entrepreneurs in your community and start asking for advice. You might be surprised how willing many people are to help.
We’re here to help! Republic provides a unique online platform that can help companies raise from individuals and angel investors. We have hundreds of thousands of investors on our platform, all looking to help their portfolio companies succeed.
Prove you are market ready
Before you reach out to potential investors, it’s important to have a fundraising pitch deck and other materials ready. Demonstrate your progress, and explain the vision that will turn you into a large, profitable company. There are a few key things you’ll want to do as you approach investors:
Establish a reputation: a smart investor will ask around. If you have a good reputation - either through your company or as a founder -you’ll have an advantage towards earning trust from investors. Deliver a product your customers love, and deeply understand their needs. Share your progress on social media, and blog about it. Tell a story your target customers will relate to.
Know your numbers: investors hate it when founders either don’t know their numbers or their forecasts are not grounded in reality. Make sure you have solid metrics to share, particularly around your traction, potential, and business model. Do your market research and be ready to share solid facts and figures around your product and industry.
Know your industry: Understand your industry trends and forecasts as well as your company’s relative position in the industry and the opportunities for the investor. At the end of the day, winning an investor means convincing them you know what you’re well-informed, and that the investment opportunity is worth the potential reward.
Do research and compile a list
Countless people are out there looking to invest in promising startup businesses, so try to connect with investors who understand your product and vision, and ideally ones who know your market. Some investors and firms may have specific interests or industry focuses, and they may have funded similar projects in the past. If they specialize in your area, they’re more likely to invest. Look up investors’ portfolios on sites like AngelList, websites, and social media, and see if your project is a fit for their portfolio. This list of target investors gives you an invaluable starting point to go out and ask for funding.
Thoughtfully craft your introduction
Preparation and planning is vital for investment outreach. When starting out, be very selective and specific. Remember that any investment is a partnership, so make sure you ask yourself what type of investor you want on board, whether they should be “active”, “silent” or “advisory”, and what else they should bring to the table, other than funding, such as specific expertise or industry knowledge. Then you want to find ways of reaching out to them - ideally through a warm introduction. Don’t send a generic mass email to hundreds of people - this strategy rarely works. Think about your audience; what is that investor interested in,why should they invest in you?
Also, when you do reach out, don’t focus on landing the investor right from the get-go. Investments are considered long-term commitments, so as we said earlier, build a relationship - ask for a meeting or for advice. If you want to get in the door with a targeted investor, think carefully about how you can maximize the chances of a meeting. Asking for advice is often a good place to start.
Give investors a reason to choose you
It’s critical to remember that investors are flooded by offers and opportunities. It can be hard to get their attention. So you need to think about your company as a product on a supermarket shelf. Ask yourself why an investor would pick your investment off the shelf when there’s so many choices? In many instances, you only have a few seconds to grab attention. Spend time on your pitch deck, and ask friends or mentors to review it.
Make it easy for potential investors to learn about your company online, through social media, your website, white papers, a blog, an eBook, a YouTube channel, or podcast. Share through social media, and be visible at events, In other words, make noise that resonates with both customers and potential investors.
Use this noise to highlight your UVP (unique value proposition) as much as possible. Tell them how you are different and make the investment opportunity clear. Show things like your growth trajectory, projected income, and your vision for the future of the company. Explain how to plan to use the funds you raise, and show how you can effectively put money to work.
Republic is a great place to start
Republic has a huge pool of members looking to invest in promising startups. We make it easy for investors to browse deals and invest in companies they believe in.
If you are looking for investors to back your company, check out our page about raising money on Republic! We strive to make the process as simple as possible for the companies that raise here.
This educational article is provided by Republic to help its users understand this area of the market, it should not be construed as investment advice as it is impersonal, disinterested and was produced by Republic for Republic’s users, without remuneration received or expected.