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Direct Marketing Article |
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8 Tips for Finding Angel Investors
By Arnie Koss
Angel investors do what ordinary mortals will not. They have the financial
ability to give life to your start-up. But they don't show their wings to
everyone. Angels have to want to be discovered. As an entrepreneur, you have
to learn how to find them.
The ideal angel investor will connect to the vision of your entrepreneurial
idea. Of most importance, the angel investor will want to feel a connection
with you, the entrepreneur, and share some of your moral and socio-cultural
values and aspirations. Angels like money; they're not above it all. While
angel investors tend to be relational and allied with the entrepreneur's
vision, they are also attuned to the financial upside of investing.
When my twin brother Ron Koss and I started Earth's Best Baby Food, the
nation's first organic baby food company, we relied heavily on angel
investors. In many instances, they were not easy to find. But we persisted,
and fortunately we met several who were attracted to our vision of promoting
organic agriculture and providing high-quality, healthy food for babies and
toddlers.
We learned a lot about angel investors during the tumultuous start-up period
that went on for three years. Here are eight tips that might help you in
finding angel investors for your venture:
1. Start with a brutally honest self assessment. This includes the
merits and timeliness of your idea; the substance and professional
appearance of an introductory document such as an executive summary or
business plan; and an introspective look at your motivations, goals, and
commitment to the venture.
2. Determine what you are willing to risk. Many early-stage investors
are comforted by knowing that the entrepreneur has and/or will make a
meaningful cash investment in their own venture. Sweat equity, while
appreciated, does not carry the same weight as cash in and assets pledged.
Angel investors have acutely sensitive antennae that can scan the
entrepreneur for any signs of reluctance or doubt.
3. Seek noncash investors too. The entrepreneur needs a variety of
champions who cumulatively lend credibility and energy to the ventures
prospects. Champions share vital networks, levy unpopular but necessary
criticism, provide free or discounted professional services (legal or
accounting, e.g.), and stay the course in the darkest hour. Look for
champions who connect to the idea and to you.
4. Family members may not be the best angels. Early on, when the
risks may be the greatest, family connections may be where easy money is
found. Not so fast. Easy may not be best, because easy may dull your
alertness to the fact that you have actually failed to deliver a product
that is compelling and that will attract others who do not share your DNA.
Family may invest for the wrong reasons (guilt) and that spells trouble for
most business relationships.
5. Be resilient and flexible. Angels are attracted to resilience,
which means that the sooner the entrepreneur learns to deal with rejection
constructively and learns from that rejection, the more interesting they
become to the many hidden observers who may be intrigued by the
entrepreneur's idea, passion, and tenacity. Enduring, bouncing back, and
becoming better may earn the respect of an angel who could become "the one."
6. Choose your angels with care. Don't accept someone's investment
until you have confidence you want them in your life. Do not ignore your
intuition, because accepting an infusion of cash from a total stranger is
like accepting a blood transfusion from that stranger. Discretion and early
detection are vitally important. In your weakest moment, think strength and
be strong. Entrepreneurs must do their own due diligence and screening in
the same way that a potential angel investor must assess the merits of an
investment.
7. Don't surrender your power and authority to an angel. Individuals
with money are just that: individuals with money. The angel may be
relatively fresh and untested in the particular sphere of entrepreneurial
initiative they are cannon-balling into. They may be quite sophisticated and
wiser in other realms of investment and/or life. Having money does not make
them smart, competent, or sophisticated in the particular area of business
you are entering.
8. Remember that angels are always out there. Even in the most
challenging economic times, there are always investors looking for
opportunities. The entrepreneur's challenge is to identify new ways to
network and to introduce their idea to as many people and groups as
possible. The expression "one thing leads to another" applies to the
entrepreneur's reality. Even though it may be invisible, once your idea is
being discussed by others, most of whom you don't know, unexpected
possibility is in play and surprising and amazing things can happen.
As you look for angel investors, remember that there are also demon
investors. They are greedy, but typically hide their darkness very well.
They may understand the entrepreneur's vision, but definitely not the
entrepreneur. When the illusion falls away, demons are about themselves and
their insatiable appetites. Fortunately, most are averse to the earliest
start-up risks, but they are out there even in the seed money stage, so
beware.
About the Author:
Arnie Koss is coauthor, with his brother Ron Koss, of The Earth's Best
Story: A Bittersweet Tale of Twin Brothers Who Sparked an Organic Revolution
(Chelsea Green Publishing, March 2010), a lively business memoir that
recounts the founding of America's first nationally distributed organic
foods company. |
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