How to Find and Pitch Angel Investors: The Founder's GuideVenture Building
You’re a shiny new startup that’s about to embark on the entrepreneurial journey of a lifetime. But to get your business off the ground, you need money. That’s where angel investors come into the picture.
What are angel investors?
These are wealthy individuals who invest at the earliest stage of a company’s lifecycle in exchange for a piece of the pie – most commonly in the form of equity in the company.
Angel investors are an essential component of the startup ecosystem and can add substantial value beyond just a cash injection. When an investor agrees to fund your idea, you’re getting a vote of confidence that can help attract venture capital interest. Not to mention, angels can help you make key introductions, give critical advice, and there’s a pretty good chance that they’ll top up their investment with you later if your business scales.
So here is your beginner’s guide on where to look and how to woo angel investors to help you ignite your business.
How angels invest
Angel investors may choose to invest alone or as part of a syndicate, where a group of investors pool together their resources and share the risks. Regardless of how they operate, angels diversify their portfolio by investing in several high-growth businesses. Rather than putting all their eggs in one basket, they’re willing to take educated bets on several investment opportunities to increase their chances of earning a high ROI.
Angel investors target companies they believe will provide them with at least 10 times their investment over five years. They typically provide startups with funding in exchange for either convertible debt (bonds) or equity (shares in the company). However, sometimes, investors can claim their stakes with a combination of both these things. When they put down capital, they can have a portion of ownership in the startup and rights to its potential future profits.
Just like with any new product on the market, angel investors understand that startups have a high-risk ratio for failure. So that’s why they need to feel confident that the potential upside of investing in a company outweighs the downside.
What angel investors look for in a startup
Before committing to fund your company, angel investors will need to check off a few items on their list:
- Proof: They want to see a working prototype or, at the very least, a sound business and financial model. Angel investors are interested in seeing not only you’ve done the work and research but that your business is built on realistic projections that are backed by data.
- Founding team: Who you have onboard matters, especially your founders. Investors will want to know what relevant domain experience each member carries and why your team is uniquely capable of executing your company’s vision and business plan.
- Market opportunity: Is there a big enough market? Just like with any type of investor, angels need to know if there’s an addressable market and what percentage of the market you plan on capturing over time.
- Early traction: While not all angel investors need to see early traction at this stage, it sure doesn’t hurt. Proving customer interest and showing any first signs of success, such as waitlist sign-ups, gives them more confidence in your company.
Where to find angel investors
Securing angel financing depends on high-quality research and developing and nurturing your investor network. To begin, know the kind of person you’re looking for. The usual suspects will have an income greater than $100,000, are between 40 and 60 years old, have previous entrepreneurial success, and a net worth of over $1 million.
Once you know who you’re looking for, map out the core business problems you need to solve and the specific skills or experience that an angel could bring to the table to help you shoulder off some of the growing pains. For instance, who do you need to get connected with to launch your product?
Next, look to your personal network of friends, family, and colleagues to see if anyone has experience investing in startups and if they’d be willing to make a warm introduction. Spark up conversations, not just to secure investment but to get a lay of the land of investor networks and receive quality feedback from experienced people. Connect with entrepreneurs in your industry, find out how they met their investors, and continue branching out your network.
There is lots of angel activity close to home – you just need to know where to look. One of the best ways to connect locally is within these groups:
- Local economic development centres
- Business development centres
- Accelerators and incubators
- Platform innovators
- Pitching competitions or events
In addition to building relationships in-person, here are several digital search platforms and angel groups across Canada to find investors:
- AngelList: A platform for startups, angel investors, and job-seekers looking to join fast-growing companies.
- Canadian Investment Network: Connects entrepreneurs with a global network of angel investors.
- National Angel Capital Organization: A community of 4,200 angel investors, 45 incubators and accelerators, and 44 angel groups.
- Canadian International Angel Investors: Provides financing, management expertise, and networking opportunities as early-stage tech companies establish themselves in Canada.
- Golden Triangle Angel Network: Connects angels with pre-selected, investment-ready companies. Most angels are active investors and mentor the companies in which they invest.
- York Angel Investors Inc.: A group of member-based accredited investors seeking to invest in early-stage startups in B2B and B2C SaaS, Fintech, CleanTech, IoT, InsureTech, HealthTech and marketplace solutions.
- TenX Angel Investors Inc.: A hands-on, early-stage venture capital and advisory firm that invests in companies operating in SaaS, robotics, blockchain, artificial intelligence, Fintech, and cannabis sectors.
- Keiretsu Forum Canada: A community of accredited private equity angel investors, venture capitalists, and corporate investors.
- VANTEC Angel Network Inc.: Introduces early-stage investors to promising tech ventures in British Columbia.
How to get an introduction
Once you’ve found your ideal investor, it’s time to get in touch and strike up an introduction. Naturally, warm introductions have the greatest potential of going the distance, so whenever possible, find people who are connected to the investors you’re trying to reach, whether that’s tapping into your LinkedIn network or people you’ve met at events.
The biggest mistake that first-time founders make is jumping the gun with the ask in an introduction. Leave money talk completely off the table at this stage, and instead, focus on asking for advice, which doesn’t come at a cost and is invaluable to your decision-making. Keep your conversation brief in-person or via email, and include your deck so you can reconnect with them at a later time to chat more business.
How to pitch angels
Now that you know where to find angel investors and how to make the first touchpoint, it’s time to refine your elevator pitch to convince investors to bet on you. A pitch deck is an essential fundraising tool every founder needs in their arsenal, whether you’re looking to secure an angel round of $50,000 or a Series A of $50 million. It will be the most important presentation you create, so don’t underestimate the preparation.
First, do your research: on your investors, industry, and your competition. Let your domain expertise and charisma shine, keeping in mind that nailing your delivery is just as important as the points you make in your deck. Angel investors generally agree that the most effective pitches are those that tell a compelling, concise, and memorable story.
At this stage of your growth, your company likely doesn’t have the sales data, marketing metrics, or numbers to persuade angels as you would if you were further along. But what you do have is your vision and business opportunity, which should be defensible against critique and competition.
So focus on the problem your product or service solves and why people would pay for it. Be clear about the value you can bring to both customers and investors, and delve into the commercial opportunity and how your company is best positioned to take it on despite any other players in the mix.
Often what many first-time founders get wrong in the angel investment round is not basing their valuation on the measurable success they have to date. If angels are going to take a leap of faith with you, they’ll need to see your worth today, so disclose your achievements thus far while outlining your plans for the future.
Most importantly, perfecting your pitch takes practice, so put in the time to develop a presentation that shows off your competency, confidence, and what investors are missing if they don’t get in on your business opportunity.
Put your powers of persuasion to the test
It’s not easy to get people outside your inner circle to invest in your company, but the search is worthwhile because it connects you with an invaluable network of experienced individuals in your industry. Angel investors can shape your company’s success beyond just providing you with the starting capital to lift your business off the ground. They can equip you with connections and mentorship to future-proof your business as you evolve into the next stages of growth.
To learn more about connecting with an investor network, check out Harvest’s Ecosystem Directory, access our pitch deck materials, or book a consultation to grow and elevate your business.