This content has been provided by Sonabank.
You’ve just started a business. You’ve got the idea, you’ve got the product, you’ve possibly got a storefront. You’ve also built up a community of friends and family members who are excited to support you. Now what? Where do you go from here?
There are many options available to women in business so, once your business is in place and you’ve started growing, angel investing could be the next step to get the additional financing your company needs to succeed.
Angel investing is when individual investors assess your business’s prospects and buy a piece of your company, says Allyson Redpath, founder of investment organization Citrine Angels, an angel investing company for women, by women.
Unlike stock market investing, angel investing is private, with specific net worth and income requirements that allow you and your investors to feel secure in the partnership. With the help of angel investing, you can receive the funding and support you need to grow and eventually move on to venture capital.
What angel investors look for
Angel investors fund early-stage businesses in almost any industry. The primary thing they’ll look for in your company is growth.
“If you think this company can be $100 million in revenue in a fairly short timeframe, then it has potential,” Redpath says. “If it’s a slower, longer-term thing, then it’s less likely.”
Your company is more likely to get angel investors if it has a full team, the main functions in place, evidence of growth, and evidence that a product is doing well.
Angel investing vs. loans
Redpath recommends that you consider loans before angel investing if your company has good growth prospects and you don’t want to sell a piece of it.“Some companies I talk to automatically think, ‘oh, we need investors, we need venture capital,’ because it’s so well-known, and sometimes companies don’t realize that they can get bank loans,” Redpath says.
While bank loans are less expensive than angel investing, angel investing is more accessible if you’re a beginning business owner, says Liz Doerr, co-founder of Sandbox, a company that helps entrepreneurs launch, grow, and monetize businesses.
Many venture capitalists and angel investors don’t look at cashflow as the main thing they base their decision on, Doerr says.
Generally, the entrepreneurs getting angel investments are not cashflow positive because they’re still growing and putting a lot of money into their company, Redpath says.
“They can’t get bank loans for the most part,” she says.
How to get an angel investor
First, assess your business to see if it is “venture backable”, Redpath says.
Second, have your pitch deck — the way you present your company to investors — down.
“The pitch deck for me is really a way of communicating your story in a concise way that is compelling, and you really need to have that before you start talking to anyone because that’s the first thing that they’re going to want to know,” Redpath says.
Third, find the right investors. There are many groups out there, but it’s important to find investors suited to your business.
“Some companies, they just want to talk to anybody that’s an investor, but that actually is not a good use of time,” Redpath says. “It takes a lot of time to raise money, so don’t do it unless you absolutely have to, and you have no other options — and be strategic about it.”
For more resources designed to meet the unique needs of women in business, including an array of financial products exclusively for entrepreneurial women, visit Sonabank.
The opinions and information provided by the guests in this article do not constitute advice from, or the opinion of, Sonabank.
