Need an Angel investor? Stop asking for money.
by Jim Taylor, Florida SBDC at USF
The title of this article may not seem to make any sense. You need an Angel investor for your start-up business, but can’t seem to find any wealthy or accredited investors to give you the cash. Why is this so hard?
A few years ago, I was golfing with a recently retired executive who cashed out for nearly $50 million, and many in his community knew it. While we were at the bag-drop area waiting to tee off, the starter (a golf course employee) began pitching my friend a business idea he had for a driving range and batting cages. Later in the clubhouse, a gentleman approached and handed my friend a business card with his brokerage firm information and tried to convince him briefly why he should move his investments to his firm. At dinner that night, someone approached our table, with our wives, and asked that he fund a local charity event.
When a potential Angel investor or an individual has a high net worth, and people find out about it, everyone asks them for money. Friends, family, acquaintances. Everyone.
You have a great business idea, and need Angel funding. Of course you are going to seek Angel investors who have the capital to fund your project. But guess what. Everyone in your position walks around to investors with a hand-out, and a business plan. Needless to say, these Angel investors quickly get tired of everyone asking them for money. So how can you be different?
Most of the trouble in the world is caused by people wanting to be important. – T.S. Eliot
#1: Don’t ask for money.
The first aspect in approaching these types of investors is to not just asking them for money. They have generally been successful enough in business to have some value beyond just a check. Understand human behavior and make them feel important. Ask their advice on your business. Ask what they would do to raise investment capital if they were in your shoes. Ask their honest opinion about your business, but do not ask for money.
#2: Target angel investors.
Target Angel investors who know your business. If you are starting a manufacturing operation, don’t seek angel investors from the real estate industry to fund your business. Seek a successful individual who did well in manufacturing. This is called smart money. Smart money comes from investors that can add more than just cash to your business. They often can offer decades of experience, industry knowledge, and many industry contacts that can boost your business. Ask the individual for their advice, and if they add value and are interested, create a Board of Advisors for your company. This Board of Advisors should be composed of individuals who can offer experience, advice, and industry networks to your company.
By making the potential angel investor feel important, and giving them the opportunity to contribute beyond just writing a check; you very often will find yourself with the funding you need without ever asking for it.