Need more startup capital? How to negotiate with angel investors for more money
Startups in need of funds can look for angel investors to help them achieve their goals.
All those who have decided to start their own business have also demonstrated their faith in what they do and a great deal of confidence. Overcoming the fear of the unknown and anxiety over what the future might bring is the first step that almost every entrepreneur has gone through.
Making a decision about the direction in which the business in question is going to grow is another important step towards achieving success. After that, a startup owner needs to choose the strategy that would help the business take off. Usually, that’s the first major obstacle, since many startups require some financial support.
Not many aspiring entrepreneurs have enough money to set the wheels in motion, which means they have to turn to individuals and/or institutions for help. The fact is that there are now more options to obtain the financial support for such endeavors gives an advantage, at least in this segment, to those who are starting their own company now, in comparison to those who did the same thing in the past.
Apart from family, friends, and banks, new entrepreneurs now have an opportunity to crowdfund their project or turn to angel investors for support. While the former option is now a household name, people are still finding it difficult to grasp the concept of the latter. So, let us take a look at how angel investors can help a new business and what that assistance entails.
An angel investor is an independent individual who provides capital for the development of a business but is also usually interested to take a more active part in the project in a form of a guide and mentor, who has some experience and knowledge related to running a business, and whose advice can be priceless.
They can also help the business in question by introducing it to a large network, thus helping guide the entrepreneur in the new business venture. Angel investors, also known as business angels, are not typical venture capitalists since they invest their own money in an amount that is lower than the one which would be invested by a venture capitalist. Also, angel investors make their own decision concerning investments and expect a return on their investment.
Types of angel investors
Depending on their relationship to your business, we can divide them into two categories. Affiliated angel investors are those who have a connection with your company. For example, they could be your suppliers or customers.
On the other hand, there are non-affiliated ones, who have no connections whatsoever with your business. Either way, their help can prove to be decisive in helping your startup grow.
What do angel investors look for?
Everyone who is interested in investing their own money in other person’s business is looking for a return on investment that would justify granting help.
The idea you present to them has to be original at least in some respect because no-one would invest in something that offers no unique selling point.
That’s why your project has to have that “something extra,” which would attract the attention of a prospective investor.
If you have had some great results or have substantial experience in the field, make sure you emphasize that to your angel investor. Unless your idea is truly groundbreaking, no investor would feel comfortable investing in a project which should be run by a person with little or no experience.
Make sure you mention all the relevant things from your past that would help you gain your investor’s trust. They find the idea and the person behind it equally important when making their decision about investing money.
Show that you are ready for the future
Another element that you should focus on is convincing the investor that you have a clear idea about the direction in which your business would be going and where it is likely to be at some point in the future. In order to do that, you need to have a sound strategy in place and mention all the relevant stages and checkpoints.
Furthermore, you need to know what other people need to be involved in the work of your company. Finding a reliable tax accountant, suppliers, marketing experts and other professionals is not an easy task, but you have to know exactly what kind of people you need and where to find them. That would help the investor get a positive impression of you, as a realistic and dedicated business person.
Anticipate problems and offer solutions
Every potential investor wants to hear what kind of problems you expect and how you plan to deal with them. Be realistic and show that you know the situation in your field of business and that you are familiar with the competition.
Offer your ideas to remedy any problem you think you will come across and stay positive about the outcome. Having no idea how to deal with a problem is worse than having a wrong idea sometimes and your readiness to offer your suggestion will also help the investor learn about the way you think.
The contribution of an angel investor can go well beyond the financial aspect. Someone with experience listening to your idea, asking questions and making you think even more about your project is sometimes priceless.
The fact that they are ready to share the risk with you and introduce you to their network of business partners would mean a lot to you, both in terms of boosting your confidence and achieving better business results.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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