Business Angels and Where to Find Them

Other than the fact that they are all global leaders in their respective industries, what is one thing that Apple, Amazon, Google, Microsoft, Dell, and Intel all have in common? In the beginning phases, each one of them received assistance from business angels. Many individuals frequently get the terms business angels and investors mixed up. Because of this, I’m going to explain what business angels are, how they differ from investors, and where you may find business angels in this article.

Who is a business angel?

A person who invests in a company in its very early stages of project development, when there are still no concrete data to back up the rate of return and overall success, is known as a business angel. At this point, there might not even be a product prototype in the traditional sense; rather, the project owner might just be someone who is enthusiastic about the idea and has some suggestions about how it could evolve. There are times when these are simply regular figures illustrating a probable benefit. To put it simply, a business angel is a person who is willing to make an investment in a company either when it is still just an idea or upon its launch.

It wasn’t until the late 1970s that people started using the phrase “business angel” in its modern sense. During that time period, wealthy individuals who put their money into startups were referred to as business angels in the industry. Things haven’t altered all that much since then, with the exception of the increase in the proportion of women serving as business angels.

Business angels are comprised of a large number of professional investors in addition to regular business owners. Because this strategy helps diversify risks, entrepreneurs often divide their capital and invest only a portion of it in each of the startups. Now, what exactly differentiates an investor from a business angel in the first place?

A business angel and a professional investor: Similarities and differences

For starters, it stands to mention that investors can act as business angels, too—there is no crime in that. I try to invest as both a business angel and a classical investor. I have holdings in the stock market, in real estate, and in businesses that provide catering services. Another percentage of my funds is invested in new businesses that I believe have a lot of potential. Having said that, keep in mind that this is not a hard and fast rule. A business angel might not necessarily be interested in investing in traditional assets; instead, they would rather put their money into new ventures.

So, let’s get to it.

Business angel vs investor

In a nutshell, a business angel is a type of investor that bets on a fledgling company or project in the hopes of making a substantial return, usually in the form of a solid ownership stake.

How to attract a business angel to your project and where to look for one

Finding a business angel can be challenging. The reason is obvious: the startup landscape is extremely competitive, and there are significant risks involved for investors. As I mentioned earlier, a business angel typically makes an investment while it is still somewhat challenging to estimate the project’s prospective profitability. Professional business angels still weigh the potential rewards against the potential losses before deciding to invest in a startup as a partner. As a result, even in the early stages, startups put their best foot forward to impress a business angel enough for them to invest in their idea.

So, where do you go to find business angels?

1. Online.. Numerous startups and venture capital firms now have an online presence. Knowing English is crucial because the United States is home to the most sophisticated business angel investment culture. This is because the idea must be presented in a language that is accessible to potential investors.
2. Business clubs, and conferences devoted to business and financial matters. A regular investor can transition into a business angel, as I mentioned before. So, it’s a good idea to participate in niche gatherings and events. Do your homework on the other attendees beforehand and have presentations ready to provide to a possible business angel if they ask to see them.
3. Networking. To maximize the response to your requests, you should reach out to as many people as possible, including friends and family. It’s not uncommon for entrepreneurs to brag about their startup to their friends, who may then brag to their friends, one of whom may turn out to be a wealthy investor.

I’ve previously warned you that there’s a lot of competition, so your project needs to stand out. Even if you haven’t done the math, there are ways to pitch your ideas that will make the business angel interested. With my mentees, I often share my best practices that cover everything from deciding on a business structure through licensing in order to bring in investors, partners, and licensees.

Legitimate business angels versus scammers: What else do you need to know about business angels?

There is a chance of encountering scammers while searching for business angels. Take heed of these precautions to avoid harm.

1. Find out as much as you possibly can about the potential business angel, including the types of investments they made, their terms, and whether or not those investments are still active. Talk to those who have already worked with this person.
2. Don’t send any money. There are a bunch of “business angels” advertising their prepayment services on the web. Make sure to stay away from them.
3. Use caution. The theft of another person’s idea is a prevalent form of fraud, especially when it comes to innovative technological solutions. To protect your intellectual property, have a lawyer draft a nondisclosure agreement and apply for a patent.
4. Jot down a number of potential approaches to luring investors. Some investors may take advantage of the business owner’s difficult situation by investing their money in the venture under disadvantageous terms. Having a backup plan in place to secure the required funding is therefore always recommended.

My main piece of advice is to formalize all terms of engagement with a business angel in a legally binding contract. That way you can protect yourself as much as possible. Although lawyers can help draft the contract, it is your responsibility to know what you are agreeing to as the project’s owner. Why is it important to know this? There are instances when you have to make a quick decison, and a lawyer may be unavailable for whatever reason, or there may not even be a lawyer on a young team. That is why the owner of the project must have full knowledge of the terms of the agreement before signing.

You can find an investor for a project even at the idea stage. The most important thing is for you to have faith in its success and give it the proper presentation to catch the investor’s eye.

I hope all your business plans go smoothly. Also, if you have any questions or an interesting project to pitch, feel free to reach me via the listed social media sites.