This article is written by Surbhi Singh who is pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho.
Table of Contents
Introduction
Everybody has heard of Paytm, Flipkart, Zomato, and Ola and many other more, what’s common in them, yes these all are some of the big names which are E-Commerce websites and have their own apps. But there is more to it, before becoming household names these were just new ideas of young minds, started with a very nominal capital investment but now these firms have become a billion dollar industry. This article will help you in taking the right approach and how to find angel investors. First let us know about a startup.
What is a Startup?
Eric Ries, the creator of the Lean Startup methodology defines startup as “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty”. Startup is basically a company in the early stages (5-10 years old) founded by young minds to develop a product which is unique and innovative in the market. To expand the operations and for the growth of the company, a startup needs additional funding from venture capitalists and angel investors.
Let’s say Mr. A has an innovative idea but has very limited financial resources, how can he expand the operations and outreach, there are quite a few options for procurement of finances one of them is with a help of an investor, fortunately there are specific set of investors called angel investors who looks for opportunities to invest in new businesses.
Who is an Angel investor?
An angel investor (also known as a private investor, seed investor or angel funder) is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. Angel investor mainly invests when the startup is at a very early stage. Angel investors are individuals who have excess funds and look for opportunities for investment that gives higher rate of return than given by other traditional investments.
Their investment and mentorship help the startups to take off from the ground. All startup are born as a great idea developed by one or more entrepreneur who dreams of transforming their vision into reality but not all startup make it to the end. The primary reason for such crash is a shortfall of sufficient funds to get the business rolling. So the biggest dilemma that entrepreneurs face is – How to find and attract investors for their business?
How to find Angel investors?
Ask your family or friends for Capital
This is one of the easiest ways of funding your business. Talk to your family and friends about your business plan. Decide whether you are looking for loan or for investment funds. Don’t assume just because they are your family or friends you are going to seal the deal. Do a proper pitching and explain them your business plan. Be clear about the risks involved and how you are going to return the money.
Find on LinkedIn
There are many angel investors in India. You can find them online especially on LinkedIn. These investors have already invested in many startups and accelerated their growth. Do your search, Connect with them and send a short pitch of your startup idea. There are chances if they like your idea they can connect with you as well. Some of the prominent angel investors’ are-
- Sanjay Mehta – Invested in 103 startup companies. His key investment includes LogiNext, Wow! Momos, Box8.
- Sunil Kalra- Invested in startups like Hashcube, CrayonData, CultureAlley.
- Rajan Anandan- Mostly invests in Mobile Saas and Internet sectors. Invested in InstantMojo, StepOut, MissMalini.com, MobileWalla.
- Anupam Mittal-Invested in 50 startups including Ola Cabs, HackerEarth, myHQ, Drivezy.
- Girish Mathrubootham- Mostly invests in SAAS, customer support, Enterprise Software. Invested in Unacademy, Whatfix, The Ken.
There are many other angel investors, you can search in Google and will easily find the names.
Join Online Platforms
There are many online platforms that are designed for angel investors and entrepreneurs to meet. You can register in such platforms and can get direct access to investors.
Some of the reliable platforms are-
- Indian Angel Network.
- Investment Network.
- Angel.co.
- LetsVenture.
- Seedfund.
- Khosla Ventures.
- Lead Angels.
- Wefunder.
Contact Professional Fundraiser
You can hire professional fundraiser who acts as a middleman between investors and entrepreneurs. They help in linking up with the angel investors and you have to pay for their services.
Attend Business Events and Competitions
You can find investors by attending such competitions and events. You can even participate and showcase your business plans.
How to find investor is one tough task and approaching and convincing them is another. You can have the most unique idea in the world but if approaching method is wrong you can lose many opportunities. It is very important to be well prepared. There are chances one may experience nervous breakdown or start rumbling about how unique one’s business plan is. Think and focus on what makes you different. Think from investor’s perspective and question yourself. If you were the investor why would you invest in such business plan?
There are certain key points that every startup needs to keep in mind while approaching an investor. These points will help you in convincing investors. Let’s get started:
Know your Vision and Mission
A vision defines why your business exists. It gives a clear direction where your organization is heading. A mission defines the purpose of the business. Besides having a great and motivation the entrepreneur should be very clear about it. It is a great start for letting an investor know how you are going to move forward,
Showcase your business plan
After pitching about visions, let your investors know what your business plan is. Your business plan is a roadmap of the startup. Describe your goals and tell how you are going to achieve it in how much time frame. Also, include market strategy and analysis.
Specify financial details
Every business plan should specify financial aspect of the business. Every investor is concerned how much money they are going to make if they invest in your plan. A financial model explains the company’s finances.
Research your target audience
Investor will not be interested if you are not able to explain to whom you are targeting. Target audience are the ones to whom you are going to sell your product or service. Be clear and specific.
Research your competitors
Every entrepreneur should be aware that they are not the only ones in the market. There is a cut throat competition in the market. Therefore research your competitors. An investor will want to know what is different about your product. You should convince them how your product is better than your competitors.
Be clear about USP
The biggest challenge an entrepreneur faces is how to sell product. You have an amazing product but you are not able to sell it then why an investor will invest in your plan. Create your USP .Focus how your product will shake the markets. Nobody wants to invest in a product that will fizzle out.
Dress to impress and be confident
A good preparation for the pitch will help in developing sense of confidence within him. Pair your confidence with neat and comfortable dressing. Take a deep breath and calm your nerves before going for pitching.
Conclusion
Starting a business is one story and approaching the investors for an investment is another story. Funding is very important for any startup for floating in the market. An entrepreneur should always think why investor will be interested in your idea.. A smart entrepreneur knows that a business is full of risks, enlist the risks involved and be ready with viable exit strategies. It is not a guarantee but the above-mentioned points will definitely help in convincing angel investors. If you are not successful once keep trying till you achieve the funding for your startup.
References
- http://www.startuplessonslearned.com/2010/06/what-is-startup.
- https://fundersclub.com/learn/guides/vc-101/the-risks-and-rewards-of-startup-investing/
- https://www.investopedia.com/terms/a/angelinvestor
- https://www.profitableventure.com/in/find-approach-angel-investors/
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