Raising capital from business angels and private investors isn’t as easy as some people think

There’s no question about it: Raising funding for a start-up from angel investors or venture capitalists is hard.  Some entrepreneurs seem to think that investors should be falling over each other to fund their project, but the unfortunate truth is that only a small percentage of entrepreneurs are successful in raising capital for their start-up. 

Unlike venture capitalists who invest other people’s money, angels invest their OWN money.  It’s important to put yourself in the investors’ shoes – how easily would you be persuaded to give £100,000 of your own hard-earned money to a complete stranger?  Angel investors may be willing to take on more risk than most, but it’s still a tough job to get them to write you a cheque.  Here are a few things to remember when approaching angels.

Business angels are in it to make money

You must be willing to give up some ownership or control of your business, and be able to show a significant return within 3-7 years, as well as a profitable exit strategy.  Angels invest for the same reason other people do: to make money. Investing in early stage companies is high risk, so investors expect to see high returns.

Don’t stop moving your business forward

Try to develop your business as much as you possibly can: build a prototype, interview potential clients to gauge their interest, prove the concept, get some letters of intent or pre-orders and possibly even start generating some revenue. The more traction your business has, the more attractive it will be to investors.

Build a team with experience in the right areas

Angels invest primarily in people, so you need to build an experienced management team that has industry expertise and a track record of growing and exiting businesses.  If your team lacks certain skills, try to plug these gaps before approaching investors.  If you can’t afford to hire staff, you may want to consider giving away sweat equity to make sure you have the right team in place to first make your company investable and then drive the business forward.

Be realistic about valuations

Although you may think your business has the potential to earn you and your investors millions, that’s all it has: potential.  Turning a good business idea into a profitable business is harder than most people think, and there are so many potential pitfalls – a new competitor, misspending your startup budget, hiring the wrong staff, the list goes on… Work with your accountant to build realistic numbers and a realistic valuation with clear assumptions that can be defended.

Take investors’ criticism on board

Entrepreneurs looking to raise capital for their start-up will be rejected by most of the investors they approach. Listen when potential funders reject your ideas – their criticism is the best feedback you’ll get about how to make your business more appealing to investors and increase your chances of getting funded.


Angel Investment Network’s Weekly Twitter Roundup

Angel Investment News

  • UK beats the US to a tech-friendly Startup Visa: https://bit.ly/grhGx9
  • Angels Look for Investments as States Offer Tax Incentives: https://bit.ly/hZvBWd
  • 7 Chicago angels have formed an investment network for startups in the local, sustainable food distribution system: https://bit.ly/fy3x9m
  • The StartUp Visa Act will allow an entrepreneur to get a 2 year visa if a US investor wants to invest in their startup https://bit.ly/hCdWfd
  • Angel Investing – A Look from Both Perspectives: https://bit.ly/gvTjFR
  • How Angel Investing is Different from Venture Capital: https://bit.ly/hdyfdZ

Business Plans & Pitching

  • Top 20 Questions to ask before Submitting a Business Plan to Angel Investors: https://bit.ly/eUo3VR
  • Perfecting Your Pitch: Four Steps From Good To Great: https://bit.ly/gh1goH
  • 10 Tips to an Effective Investor Pitch: https://bit.ly/hfU6Tg
  • Implement these 8 steps in your investor pitch preparation and delivery to increase your chances of winning investment: https://bit.ly/gOyzyj

Fund Raising

  • The Top 8 types of angel investors https://j.mp/eHJqSz
  • Private investors: Calling on angels: https://bit.ly/i8hiQe
  • 5 Tips To Hooking Yourself An Angel Investor: https://read.bi/hlaO7q
  • What business angels look for in a venture: https://bit.ly/gECKR0
  • Innovation Is the Top Trait Business Angels Look for When Making an Investment: https://bit.ly/gWCMU4
  • Business Angels: The Solution On Where to Find Funding:https://bit.ly/fAyLUP

Marketing & Social Media

  • 5 Marketing Strategies to Increase Website Traffic: https://bit.ly/dNBton
  • 5 Epic Social Media Fails: https://bit.ly/ed2ipC
  • The 15 most Detrimental Social Media Mistakes you’re Making:ttp://read.bi/f8l8pe
  • Measuring the ROI of your social media efforts: https://usat.ly/dLNAkH
  • Top 100 social brands revealed as Dell, Nike and Starbucks top the table: https://bit.ly/gGI3Gs
  • 6 Tips for Entrepreneurs Looking for Press: https://bit.ly/g9cSq7
  • More Tips From Social Media Pros: https://bit.ly/fyMMCx

Start-Up & Entrepreneurship

  • LinkedIn’s Reid Hoffman’s 10 Rules for Entrepreneurs: https://bit.ly/gko4xa
  • 10 Revenue Models for Startups You Should Know: https://bit.ly/elOMmW
  • Chinese Entrepreneur confidence index slightly up in Q1: https://bit.ly/fLaeyH
  • Five Long-Term Challenges of Starting a Business that Entrepreneurs Forget: https://read.bi/fVCUuM
  • Entrepreneur Magazine: Now is the best time to start a business:https://bit.ly/govNDW
  • Government research shows TV shows such as the Dragons’ Den are helping to encourage entrepreneurialism in the UK: https://bit.ly/fh8IMn
  • Small Business Help Center Supports Obama’s Startup America to stimulate economic growth through entrepreneurship: https://bit.ly/eHmzYg
  • Top 10 Success Factors for Entrepreneurs: https://bit.ly/eGzRpq
  • Ten ways to waste money on a start-up: https://bit.ly/i44TE5