Playing an Angel

Networking Your Way Into (Investment) Heaven

These are the kinds of steps Tori Stuart took when she looked for angels to fund Zoe Foods, her Newton, Massachusetts, natural foods company. She networked with everyone, getting the buzz out on the street about Zoe Flax & Soy Granola, her natural remedy for the symptoms of menopause. It also helped to have a product that already had enthusiastic customers supporting it. "The challenge in raising money is communicating [about our company and product] because we're in the natural foods sector," says Stuart, 36. "[Not all] investors are natural foods consumers." Getting them to believe in a product they weren't familiar with presented its own set of unique challenges.

But starting to network early--and forging connections long before she even needed capital--is ultimately what helped Stuart and her management team raise $1.2 million even at the height of 2001's economic difficulties. "Start months before you need to," says Stuart. "And to some extent, you have to put the economy out of your mind."

So the bottom line in the angel funding arena these days is simple--it's tougher to get capital, yes, but there is still money to be had out there. "Angels by nature tend to be optimistic," says Simmons, "but they just want more assurances today than they did a few years ago. That's OK--I think [it] helps everybody. But there are still plenty of angels out there looking for deals to invest in. So entrepreneurs who do their homework and prepare--they can get financed."

Coming soon

We asked these authors what they feel the state of angel financing is right now and where they see it moving by the end of 2002.

  • "Uncertainty. There's a lot of talk about valuations being down and now being a great time to make investments. I think intellectually, that's what most people feel. Emotionally, it's very hard to pull the trigger. [So entrepreneurs] continue to be really frustrated that angels are willing to talk and look at deals and presentations, but it's very hard to get them to write a check. I think it's improving, but it's a slow trickle. It's not a flood of people racing back into the market."
    -Cal Simmons, co-author of Every Business Needs an Angel
  • "It's gone back to where it was before the period of excess in the late 1990s and 2000, when we all got swept up in venture capital and angels. I think we're sadder but wiser, having gone through the last couple years, so I see it [going] back to a more growing-businesses stage [rather] than a financial-engineering stage."
    -John May, co-author of Every Business Needs an Angel
  • "I think it's one of the best times to be an angel investor and an entrepreneur, which might be contrary to what [some] people think. The quality of the companies looking for capital has improved. There are fewer companies, but they're better companies."
    -Dee Power, co-author of Attracting Capital From Angels
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This article was originally published in the May 2002 print edition of Entrepreneur with the headline: Playing an Angel.

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