Growth
How to Find Angel Investors for Startups and Seal the Deal
Written by
Lineke Kruisinga
Published on
June 14, 2024
Written by
Published on
Angel investing is about more than just money—it's about mentorship, strategic guidance, and invaluable support in the early stages of a startup. These investors, often high-net-worth individuals and successful entrepreneurs, provide crucial early funding when traditional venture capital is out of reach. They offer not just financial backing but also experience, industry connections, and a personal commitment to your vision. We explain more about this subject in this article, diving deeper into the nuances and benefits of angel investing for budding entrepreneurs as well as help how to find angel investors.
Angel investing is a form of financial support where wealthy individuals, known as angel investors, provide capital to early-stage startups. In exchange for their investment, these angels typically receive ownership equity or convertible debt from the startup.
Angel investors usually step in when startups are too young to attract venture capital. These early investments are risky due to the startups' unproven nature but can be highly rewarding if the business succeeds. Besides financial support, angel investors often offer mentorship and strategic guidance to help startups grow.
Emotional Connection: Angel investors often have a personal connection to the companies they fund. They typically invest in businesses that hold personal significance for them. Conversely, venture capitalists prioritize profit, targeting fast-growing startups poised to disrupt industries.
Stage of Investment: Angel investors provide seed funding, stepping in after entrepreneurs have exhausted personal and familial resources. Their investments usually range from tens to hundreds of thousands of dollars. VCs, on the other hand, invest in more mature companies, often leading to valuations in the millions or billions.
➡️ Also interesting: Seed vs Series A: A Showdown of Funding Rounds
Source of Funds: Angel investors use their own money to support potential ventures, which is inherently risky. In contrast, VCs pool funds from external investors. They work for firms or funds, investing other people's money, which mitigates personal financial risk.
Role in the Company: Angel investors are usually content with a lower-level involvement in the companies they fund. VCs, however, typically seek a more active role, often requiring board seats to influence the company’s direction.
Both angel investors and VCs aim to mentor and guide the businesses they invest in, expecting equity stakes in return. However, angel investors tend to have more flexible terms.
Read more about the key differences between venture capitalists and angel investors
While venture capital (VC) and angel investing are popular funding paths, they’re not the only options for startups. Relying solely on VC can lead to significant trade-offs, including equity dilution and loss of control. Fortunately, there’s a broader spectrum of funding methods that align with various business needs, founder goals, and stages of growth.
Here’s a look at alternative funding sources beyond VC and angel investing:
These programs support early-stage startups with funding, mentorship, and resources in exchange for equity. Accelerators like Y Combinator focus on fast-tracking growth, while incubators help refine ideas over longer periods. Both are great for networking and skill-building.
By relying on personal savings or reinvesting profits, bootstrapping allows founders to retain full ownership and grow at their own pace. This method emphasizes sustainable growth, although scaling can be slower without external capital.
Governments and organizations offer grants to startups in specific industries, such as tech, sustainability, or healthcare. These funds don’t require repayment or equity exchange, making them highly competitive but non-dilutive.
A revolving credit option that allows startups to borrow as needed up to a set limit. It’s ideal for managing short-term expenses like inventory or payroll. Interest is only paid on the amount borrowed, providing flexibility.
A hybrid of debt and equity, convertible notes allow startups to secure short-term funding that converts into equity during future funding rounds. This method postpones valuation discussions, making it attractive for early-stage startups.
Startup founders often use credit cards to cover small, immediate expenses. While they’re easy to access, the high-interest rates make them risky for long-term financing or substantial spending.
Platforms like Kickstarter and Indiegogo allow startups to raise funds from a large pool of small investors. Rewards-based crowdfunding doesn’t dilute equity, while equity crowdfunding offers shares to backers in exchange for investment.
Networks like EO (Entrepreneurs’ Organization) or Startup Grind provide funding opportunities, mentorship, and access to a community of like-minded entrepreneurs. These organizations often connect members with private investors and other resources.
Structured mentorship programs offer guidance, strategic advice, and sometimes financial backing. Experienced mentors can help founders navigate challenges, improve decision-making, and prepare for future funding rounds.
High-net-worth individuals can provide capital in exchange for equity or returns. Unlike institutional investors, private investors may offer more flexibility and personalized support, making them a valuable resource for startups.
Traditional banks and alternative lenders provide loans tailored for startups. These loans can cover initial expenses like equipment or marketing. While repayment terms vary, they don’t dilute equity.
➡️ Also interesting:
Not All Startups Need VC. Here Are 6 Other Viable Funding Sources
Your Complete Guide to Securing Startup Business Loans in Europe
High-Net-Worth Individuals: People with significant personal wealth who invest their own money in startups, often seeking high returns and willing to accept substantial risk.
Successful Entrepreneurs: Individuals who have built and sold companies and now invest to share their experience, knowledge, and networks with new entrepreneurs.
Retired Executives and Professionals: Former business leaders and industry experts who invest to stay engaged in the business world and leverage their expertise.
Typical Investment Size and Stages Seed Funding:
Angel investors often provide the initial capital required to transform a business idea into a viable product or service. Investments at this stage typically range from $25,000 to $500,000.
Early-Stage: Following the seed stage, angels may continue to invest as the company gains traction and validates its business model, with investments ranging from $100,000 to $1 million.
Pros:
Easier Access for Early-Stage Startups: Angel investors are often more accessible to startups that are just beginning, providing vital early support to develop products, validate business models, and reach initial milestones. They typically look for innovative ideas and passionate founders.
More Personal and Flexible Approach: Angels offer a more flexible investment approach, leading to quicker access to funds with fewer formalities. Investment decisions are often based on personal relationships and belief in the founders, fostering a supportive and collaborative partnership.
Mentorship from Experienced Entrepreneurs: Startups benefit from the mentorship of experienced entrepreneurs who can provide valuable insights, guidance, and connections, significantly enhancing the chances of success.
➡️ Also interesting:
From Funding to Flourishing: A Deep Dive into the Essence of VC Coaching
Why Coaching is a Game-Changer for Your Startup Business
Cons:
Equity Dilution: In exchange for their investment, startups must give up a portion of their equity, which can lead to significant dilution of the founders’ ownership.
Potential for Conflict: Personal involvement and mentorship from angels can sometimes lead to conflicts over the direction and management of the company.
High Expectations: Angel investors often have high expectations for growth and returns, which can pressure the startup to meet ambitious targets.
➡️ Also interesting: Angel Round Funding: Timing and Reasons to Consider It
As you read through this article, you probably discovered that angel investors can be important to the success of your startup. They provide the critical early-stage funding necessary to turn your vision into reality. But how do you actually go about finding these invaluable supporters?
Here are several strategies:
Before reaching out to potential investors, it's important to do your homework. Gain an understanding of your business model, target market, and financial standing. This preparation will not only help you communicate effectively with potential investors but also enable you to identify those who are the best fit for your business.Additionally, researching investors' backgrounds and investment histories can provide insights into their preferences and increase your chances of making a successful pitch. When pitching to angel investors, remember that each one is unique. Tailor your pitch to fit each investor’s preferences and portfolio. Highlight why your startup aligns with their investment goals and detail your strategy for delivering a solid return on their investment.
Once you've identified your network, it's crucial to leverage it effectively to achieve your career goals. Start by reaching out to key individuals who can offer guidance, mentorship, or collaboration opportunities. Networking is a two-way street, so be ready to provide support and assistance to others as well. Your connections can be invaluable for finding angel investors—personal introductions often carry more weight and can open doors to essential meetings. Engaging with your network also provides insights and advice on refining your pitch and approaching investors with confidence.
Industry events and conferences are excellent places to meet potential investors. These gatherings attract people interested in the startup ecosystem, including angel investors. Attend these events to network and make connections that could lead to funding opportunities. Additionally, participating in panels or giving presentations at these events can showcase your expertise and attract investor interest.
Consider joining an angel group, which consists of investors who pool their resources to fund startups. Being part of such a group can provide access to a network of investors interested in supporting emerging businesses.
Several online platforms can help you connect with potential investors. Websites like AngelList and Gust allow you to create a profile for your startup and reach out to investors who might be interested in your business. These platforms can be an effective way to broaden your search and find the right investors. Additionally, engaging with these platforms can provide access to investor reviews and feedback, helping you refine your approach.
Finding investors is only half the battle. The next step is making the most of the resources and events available to you. We've identified key sources and popular events so you don't have to spend your valuable time searching. By attending the right industry events, tapping into specific networks, and using key platforms, you can significantly increase your chances of meeting angel investors. In the next section, we’ve found the top sources and must-attend events that are essential for connecting with angel investors and securing the funding you need.
About: AngelList is a global hub for startups seeking angel investors and venture capitalists, boasting a strong presence in Central and Eastern Europe. Founders can apply for funding by creating a pitch deck and submitting it to AngelList. The platform then distributes the pitch to relevant investors within its extensive network.
About: EBAN is a non-profit association dedicated to promoting angel investing and fostering early-stage investments across Europe. Representing over 150 angel investing organizations and more than 30,000 individual investors, EBAN offers networking opportunities, training and education programs, and advocacy initiatives for the angel investing community.
About: Crowdcube, a UK-based equity crowdfunding platform, links startups with a community of investors eager to support early-stage ventures. Startups can raise funds by selling shares to a large pool of investors. Crowdcube simplifies the fundraising process and provides access to a network of experienced investors for mentorship and support.
About: Leapfunder, based in the Netherlands, is an online platform that connects startups with a network of angel investors. Startups can create investment rounds and share them with selected investors who choose to invest. Leapfunder also offers legal and financial services to aid startups in the fundraising process, including documentation and due diligence support.
Location: Copenhagen
TechBBQ TechBBQ started as a simple barbecue in a Copenhagen park in 2013. Now, every September, it's one of Scandinavia's largest and coziest tech events. TechBBQ offers exciting stage talks, awesome startup pitch contests, showcase areas, networking opportunities, and the unique Danish coziness known as “hygge”!
Location: Lisbon, Portugal
Web Summit Started in 2009 by Paddy Cosgrave, David Kelly, and Daire Hickey, Web Summit is a tech extravaganza held annually in Lisbon since 2016. While once a leading event, its political affiliations have caused a shift, distancing much of the ecosystem and sponsors. Despite this, it's still a notable gathering, every November, for tech enthusiasts and innovators.
Location: Helsinki, Finland
Slush Slush is the ultimate yearly startup and tech bash in Helsinki. Founded in 2008 by Finnish entrepreneurs, it has evolved from a small meetup to a global phenomenon around November. It’s the go-to place for startup founders to mingle with venture capitalists through activities like matchmaking and pitching contests. Slush is where you showcase your startup, hunt for investments, and network through its vibrant side events.
Investors prioritize a skilled, driven, and experienced team over the idea itself. Key questions:
Investors seek scalable businesses. Ensure your business has the potential for significant growth. Highlight the addressable market and your target share.
Early traction is crucial for attracting investment. Demonstrate progress with:
Investors value passionate, determined founders ready to face challenges and grow the business. Demonstrate genuine commitment.
Founders must know their financials and key metrics:
Warm introductions from trusted sources (entrepreneurs, lawyers, bankers) are vital for capturing investor interest. Cold solicitations are often ignored.
A compelling 15-20 page pitch deck is essential. It should showcase an interesting business model, committed founders, and a large opportunity. Review other pitch decks for improvement ideas.
Clearly articulate your product’s uniqueness. Expect questions on:
Investors want to know how their money will be used and your burn rate. This helps them assess if your fundraising plans are reasonable and if you can reach the next milestone.
For tech startups, differentiation is key. Investors will explore:
Investors seek significant growth potential. Avoid unrealistic projections. Clearly articulate and justify key assumptions. Be ready for pushback.
Building a great product isn’t enough. Have a solid marketing plan. Investors will ask:
Be prepared for questions on:
Pitchdrive's success with entrepreneur-led mentorship is evident in the achievements of its portfolio companies. With 70% of these companies having raised a follow-on round, Pitchdrive's success rate far surpasses the average of 40% for (pre)seed funds.
They offer human capital, which can be more valuable in the early days than money alone. Angels might write a check for a smaller amount than you'd ideally like, but they can be invaluable to your startup. Some invest purely based on their own interest. Often, high conviction angels jump in first, while other investors play the wait-and-see game for a lead VC to de-risk the round. Angels see investing in your company as a bid toward something they intrinsically care about, and they might have social capital in the space you’re building in. Down the line, they may facilitate introductions to larger lead VCs and family offices. Most angels now are a combination of operators, scouts, and investors, so you're really getting a lot out of them.
Avoid gatekeepers and find your goalkeepers. In Marc Ecko’s book Unlabel: Selling You Without Selling Out, the fashion designer and entrepreneur writes about how most entrepreneurs obsess about the opinions of gatekeepers. In the startup world, those are the VCs, press, critics, and peers that can distract you from building with authenticity. Goalkeepers, on the other hand, tell you that what you’re doing is valuable and empower you to keep creating. They do so through actions such as angel investing, buying your product, using your services, or engaging in your content. Angels are your goalkeepers.
Finding strategic angels — goalkeepers — that personally resonate with your mission and experiences might help you gain early traction.
We think of angels as true believers: Angels help you push from zero to one. Angels are often the first to take a risk on your idea, offering the initial capital needed to get your product or service off the ground. This initial investment is critical for covering early-stage expenses such as product development, marketing, and hiring key team members. By taking this risk, angels help mitigate the financial uncertainty that plagues many startups in their infancy. Consider the story of Mailchimp, an email marketing platform that started with minimal funding. Early on, angel investors played a pivotal role in supporting the company’s development and validating its market potential. Despite the initial struggles with funding, Mailchimp focused on organic growth and customer satisfaction. By the time they were ready to seek larger investments, the groundwork laid by their angel investors had positioned them for substantial success. Today, Mailchimp is a leading company in its sector, having been acquired by Intuit for $12 billion.
Unlike venture capitalists, who often demand significant equity and control, angel investors typically take a more hands-off approach. This allows founders to retain more control over their company’s direction and make decisions that align with their vision. Angel investors usually invest in the early stages when flexibility and quick pivots are crucial, making them ideal partners for startups refining their product and market strategy.
Angels provide not just capital but also valuable experience and networks. Though they might write smaller checks, their involvement is invaluable. Many invest out of personal passion, often jumping in first while others wait for a lead VC. They offer substantial social capital and can facilitate introductions to larger VCs and family offices.
Today's angels are often a mix of operators, scouts, and investors, offering strategic guidance and mentorship. Their support extends beyond financial investment, making them vital allies in the early stages of a startup's journey.
When diving into the world of angel investing, you might picture a bunch of actual angels handing out golden tickets to success. But in reality, angel investors are the ones who take promising ideas and help turn them into big businesses. We’ve talked about different angel investors, so now let’s meet some of the most famous ones. These are the investors who have made a name for themselves by betting early and big on startups that went on to do great things.
Famous angels
Peter Thiel: Think of Peter Thiel as the startup whisperer. Co-founder of PayPal and an early investor in Facebook, Thiel has a knack for spotting the next big thing. Now a partner at Founders Fund, he’s known for his contrarian views and bold bets on risky ventures. Take Palantir, for instance – a data analytics startup now worth over $20 billion. Thiel's portfolio reads like a who's who of unicorns, including Airbnb and SpaceX. He’s the guy who bets on the dark horses and watches them gallop to victory.
Chris Sacca: If angel investing had a rock star, it would be Chris Sacca. He’s the guy who saw potential in Twitter before it was cool and backed Uber and Instagram when they were just twinkles in their founders' eyes. Founder of Lowercase Capital, Sacca’s investments have hit all the high notes, raising over $1 billion. Beyond investing, he’s a podcast host, author, and all-around business savant. When Sacca talks, the tech world listens – and usually follows his lead.
Ron Conway: Ron Conway is the godfather of angel investing. He’s the early bird who caught the Google worm and backed a slew of other household names like PayPal, Twitter, and Square. Conway’s hands-on approach is legendary, often credited with securing crucial partnerships and hires for his portfolio companies. Not just a financial backer, Conway is a philanthropist, driving initiatives that shape the future. In the tech world, he’s the guardian angel you want on your side.
Adriaan Mol: A Dutch Angel Investor, a sale or IPO for his fintech unicorn Mollie may not be on the horizon yet, but founder Adriaan Mol has been sharing his knowledge and wealth with other startups for years. The Amsterdam-based entrepreneur, who also helped launch MessageBird and the payment service Zaypay, invested €750,000 in the fashion outlet Otrium in 2018, along with fashion entrepreneurs Ludo Onnink and Fred Gehring.In September 2021, Mol invested in the AI service for commodity trading, Vesper, a round that was quickly followed by an investment in Oneteam.
Janneke Niessen: A Dutch Angel Investor, after her successful exit from the digital advertising platform Improve Digital, Janneke Niessen invested in a string of startups, including Polarsteps, The Next Closet, Closure, and VanMoof. Interestingly, Niessen also became a shareholder in SpaceX, Elon Musk's space exploration company. In 2018, Niessen and startup researcher Eva de Mol launched the investment fund CapitalT. With this fund, they have invested in companies like Wizenoze, Swipeguide, and TestGorilla.
Angel investors are vital for startups, providing crucial early-stage funding and mentorship. Unlike venture capitalists, angel investors often have a personal connection to the startups and use their own money, allowing for more flexible and hands-on support. Benefits include easier access to capital, personalized mentorship, and strategic guidance, though challenges like equity dilution and high growth expectations exist. Knowing how to find angel investors requires thorough research, leveraging networks, attending industry events, joining angel groups, and using online platforms. Ultimately, angel investors help startups overcome initial hurdles, refine products, and achieve early traction, significantly enhancing their chances of success and paving the way for future growth and investment opportunities.
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