Our panel of young entrepreneurs offers their advice on how to find angel investors and pitch your startup idea to them.
Q. My product has been performing well for the last two years and I believe I have enough of a track record to pitch investors. How do I go about locating angel investors or VCs? Where do I find them?
- Matt L., Minnesota
The following answers are provided by the Young Entrepreneur Council. Founded by Scott Gerber, the Y.E.C. is a nonprofit organization that provides young entrepreneurs with access to tools, mentorship, community, and educational resources that support each stage of their business's development and growth. The organization promotes entrepreneurship as a solution to youth unemployment and underemployment.
Consult an accountant.
"No one knows who has money better than an accountant. Ask them for recommendations on finding potential investors and how you should approach them. They can be invaluable resources for structuring an appealing offer."
Take advantage of online research tools.
"There are some powerful online tools out there that connect entrepreneurs with angel investors. The best two to start out with are Angel.co and Angelsoft.net. If you put in the effort, angel investors will come knocking on your door before you know it."
Connect with other business founders.
"The quickest way in the door is through a reference. While you can certainly search online for local Angels and VC's, first research and connect with other Founders in your industry that have already been funded. Develop rapport with them and ask for a reference. If you need a starting point, try gobignetwork.com and get your feet wet first."
Become a "connector."
"When you meet someone new and learn what they're up to, connect them with someone you already know. Make sure the connection is beneficial for both parties, and over time they will do the same for you. It's a simple tactic, but it creates a long-term 'win win win' relationship, and it will help your network grow like wildfire, allowing you to meet the kind of person you need when you need them."
Focus on local connections and industry events.
"You didn't mention what industry your business is in, but if you're in tech then check out Angel.co which allows you to reach out to a database of thousands of potential investors via the Web. You can also find local investors through Angel Investor Networks. Otherwise, I recommend attending industry conferences, where you are likely to run into investors, or people who know them. "
Learn to think like an angel.
"You can type "angel investors" into Google and return plenty of results, but they could just as easily keep their money (or others' money in the case of VCs) in the bank. The key is learning to think like an Angel and understanding what about your business would make them want to invest. Target groups that would like your team, believe in your mission, and have invested in similar companies."
Check out CrunchBase.
"CrunchBase is a fantastic resource that offers in-depth information of startups and their financial and investment information. With a little research, you can find out what kinds of angels invest in what kinds of companies. This is a great starting point for finding the right investor for your venture."
Ask around on Quora.com.
"Utilize quora.com, an online resource where the users post questions and answers in categorized topics. The Angel Investors and Venture Capital categories are very active and full of useful information. After some quick research, you will locate some potential investors and at the same time gain valuable knowledge on how to improve your pitch to secure the deal."
Do you really need an angel?
"If your product has been performing well for the past 2 years, I would first ask yourself if you can grow the business without the help of outside investment. Sometimes investors are a necessity however you will have to give up some equity, some control, and often times some vision. Only look for investors when it strategically aligns and not because all the cool kids are doing it."
Attend conferences and events.
"Big events like TechCrunch Disrupt, The Next Web Conference, even Mashable parties, all have VCs swarming the place to connect with entrepreneurs that are good candidates for funding. Even if you don't end up talking to a VC that will invest in you, he or she might have suggestions for other people to talk to."
Use friends and family to build your base network.
"Friends and family are the first place to start when you're in need of funding, assuming you're looking for roughly less than $250,000. They may be interested in investing, but even if they're not, they may know someone who is. Family and friends are the obvious place to start networking, as they typically have a vested interest in your personal and professional success."
Be your own angel!
"You have a product that has a track record of success and your revenue is increasing. Can you continue to grow on your own or do you absolutely need to find an angel investor or VC? Have you pitched a bank for a loan to expand the business that way? Only look for an angel or VC if you've exhausted other financing options."
Customers = backers.
"Because I work hard enough and my products are good enough to make my customers love me, I have a great network of people who see my expertise day in day out and I can go to this group with any problems or questions whatsoever. Nobody can pitch you better than your best customers whether they are angel investors of if they know angels or VCs."
Use Angel List.
"Not everyone has the business card of a Partner at Sequoia in their rolodex. Therefore, you need to use leverage in order to put your successful product in front of investors. Angel List supplies you with that leverage by presenting you company and investment opportunity to thousands of active investors. Polish up your profile, product and keep your privacy set to 'open.'"