How to raise from angels + 12K Angel Investors Details
Angel investment—sounds heavenly, right? But before you go thinking it's all rainbows and pots of gold, let's get real. This journey isn't for the faint-hearted. It involves slicing a piece of your beloved startup pie and handing it over in exchange for cash and, sometimes, strategic wisdom.
What the Heck is Angel Investment Anyway?
Angel investment isn't some fairy-tale savior swooping in to save your startup’s butt. It's a form of equity financing where you basically say, "Hey, take a piece of my startup, and in return, gimme some cash." No, it’s not a loan; you won't need to pay it back with interest. Instead, your investors get a slice of your future success—dividends or a chunk of the profits if you ever sell. Simple, right? Not quite.
Who Are These Angels?
Angels aren't celestial beings but real, flesh-and-blood humans who plunge their own moolah into early-stage startups. They help when banks give you the side-eye, deeming you too risky. Angels usually offer more than just money—they give you precious guidance, expertise, and contacts, living up to their heavenly name.
Is This Right for You?
Sure, angels can be your best friends in the startup world, but let’s not be naive. You’ll be selling a part of your soul—oops, I mean, your business. This isn’t like going into debt; it’s bringing in new stakeholders who will want to see results. If the thought of this commitment gives you the cold sweats, maybe you need to consider debt financing or alternatives like grants or crowdfunding.
Is Your Business Even Investable?
Before you start dreaming of angel investors, ask yourself:
- Purpose of Funding: Why do you need the cash? Angel investment is usually for growing innovative startups, not keeping a slow-moving business afloat.
- Exit Strategy: Do you have a solid endgame like selling the business or an IPO to offer liquidity? Angels want their ROI, and they want it big.
- Compelling Deal: Is your startup a mouth-watering prospect for investors? High potential, strong team, innovative idea?
Remember, every angel is unique, but these are the basics.
When to Raise
Timing is everything. You could seek angel investment at any stage, even with just a concept. But buckle up because the process can drag on from 6 to 12 months. Align your funding timeline and milestones beforehand.
Story Behind Raise from Angels
Let me introduce Kristina Pereckaite. With over 8 years of guiding startups to be investment-ready and raising funds for her own biz, she founded South East Angels, which pumped £1.7M into startups. Her guide, "Raise from Angels," aims to strip away the mystique surrounding angel investments so groundbreaking ideas get the funding they deserve, regardless of who’s pitching them.
When to Pull the Trigger on Angel Investment
Raising angel investment is about validation and proof of concept. Your startup should have made enough progress to show it's not just another risky gamble but still offer enough return potential to be attractive. Validate your solution and build a strong team before you knock on those angelic doors.
Startup Valuation Guide
Valuation isn't about throwing darts while blindfolded. Download the Startup Valuation Guide to get your bearings with three simple methods and best practices to nail your startup’s value when raising your first funding round.
Assessing Your Startup's Investability
Get real. Does your business tick these boxes?
- Market Need: Are you solving an actual problem?
- Proof of Concept: Got validation for your idea?
- High Return Potential: Angels look for a 10x return within 5-10 years.
- Team Strength: Investors often bet on the team just as much as the idea.
Think like an investor. Would you buy into your startup?
Essentials Before Talking to Investors
Before you start wooing investors, ensure you have:
- A crisp, clear business description.
- A pitch deck summarizing your business, its opportunities, and vision.
- A detailed plan to hit your next milestones.
- Clear funding requirements and a plan on how you’ll use it.
Bonus points for SEIS/EIS tax relief (if applicable), a 3-5 year financial forecast, and a data room stocked with relevant docs.
To Raise or Not to Raise?
Typical angel investments range from £10k to £500k, with many first rounds at around £150k due to the Seed Enterprise Investment Scheme (SEIS). Good reasons to raise include growth funding, product/service development, and hitting revenue milestones. Bad reasons to raise? Covering insufficient revenue, repaying debt, or financing immediate expenses without a growth plan.
How Long Will it Take?
Fundraising isn’t a one-and-done deal—it could chew up months, even a year, and demands constant effort. Stay organized, plan your timeline, and don’t jump the gun.
Tools of the Trade
Arm yourself with tools like Canva for pitch decks, DocSend for sharing documents, and Finmark for financial modeling. Use CRM tools like Hubspot to keep track of your progress and investor relationships.
Angels vs. VCs – Know the Difference
Angels invest personal funds in early stages. VCs use raised funds and typically come in at later stages. Angels offer flexible, founder-friendly terms, while VCs bring extensive support and high demands for control.
Pitch Deck – What's Inside?
You can check one of my pitch decks here https://docsend.com/view/mnauc24d9dwbgpna
Grabbing Investor Attention
Stand out by reaching the right investors and using compelling headlines to showcase your achievements and validations. Tailor your pitch to highlight how you've mitigated risks or boosted rewards.
Finding Your Angels
Find ideal investors through angel groups (e.g., UK Business Angel Association), your network, startup accelerators, coworking spaces, networking events, and professional contacts.
Clarity in the Business Explanation
Clarity is king. If you can't succinctly explain what your business does, why it exists, and where it's headed, you're already digging your own grave. Angels don’t have time to decode jargon or sift through fluff. They want to know immediately—why does your startup matter? Make your elevator pitch so sharp it could cut glass.
Credibility and Team Strength
Your idea is only as strong as the team executing it. Angels scrutinize your team like hawks. Do you have the right mix of skills and experience? Have your key players proven themselves in previous roles or ventures? A team with a history of sticking together through thick and thin is like catnip to investors.
Passion and Vision
You could talk about spreadsheets and market trends until you're blue in the face, but if your eyes don't light up when you describe your vision, investors will notice. Angels want to see that you eat, sleep, and breathe your startup. Passion isn't just a nice-to-have; it's the fuel that will keep your engine running during rocky times. Vision without passion is like a car without gas.
Focus and Market Fit
In a world full of distractions, focus is your superpower. Angels need to see that you’ve pinpointed a real problem and are zeroing in on solving it better than anyone else. Are you a perfect match for your target market? If your solution feels like it was made with your audience specifically in mind, you’re on the right track.
Proof of Concept and Traction
Talk is cheap. Angels want evidence that your concept isn't just a figment of your imagination. Proof of concept and early traction provide tangible validation. Showing that you've already won some early adopters makes your pitch more compelling. It's like showing a cake that’s already half-baked rather than just the ingredients.
Market Strategy
A great product is useless if no one knows about it. Investors want to see a solid go-to-market strategy. How are you planning to acquire customers? What's your growth hacking plan? A vague “we'll figure it out as we go” approach is a surefire way to get a swift boot out the door.
Business Model
No one is investing in a charity. What’s your plan for making money? Your business model should be clear, scalable, and profitable. It's not enough to say you'll monetize later. Angels need to understand how you’ll turn a profit and when they can expect to see returns.
Planned Use of Funds
Investors want their money to be used wisely. Present a detailed plan showing how you'll allocate the funds. Whether it's for product development, marketing, or expanding your team, be precise. Showing that you’ve thought through every penny builds trust.
High Return Potential
Angels are taking a risk with the hope of a substantial reward. They’re looking for startups with the potential for at least a 10x return within 5-10 years. You need to paint a believable picture of how your startup will grow and when the payday will come.
Tax Benefits (e.g., SEIS/EIS)
In some regions, tax incentives like SEIS/EIS make investing in startups more appealing. If you qualify for such schemes, highlight this in your pitch. It's an extra layer of attraction for angels, tilting the risk-reward ratio in your favor.
Portfolio Fit
Investors often have specific sectors or types of businesses they prefer. Does your startup align with their interests and current portfolio? If you're pitching to an investor known for funding tech startups, your organic farming venture might not be a match made in heaven.
Alignment with Their Values and Interests
Angel investors are people too, with personal values and interests. If your startup's mission aligns with their own beliefs, you’ve got a much better shot. Investors are more likely to support businesses they believe in on a personal level.
Understanding these criteria isn't just a checklist; it's your roadmap to crafting a compelling pitch. Tailor your narrative to hit these points, and you’ll significantly improve your chances of securing angel investment. Trust me, when you cater to what angels are looking for, they'll more likely see the potential in your startup.
Ok tapping out. Remember, it’s not just about finding the right investors; it’s about making them believe that you’re the right investment. Cheers to all the future unicorns out there.
Angel investment isn't the cushy ride some might imagine. It's a battlefield where only the prepared survive and thrive. Know your worth, plan your strategy, and arm yourself with the right tools and information.
Now, go out and conquer.
Here is a custom GPT that include the database for easy search.
You can check google sheet here
