It used to be that finding angel investors mostly involved figuring out who you personally knew who had money -- maybe a rich uncle or former boss -- and asking them to invest in your business. If you were lucky, maybe you scared up two or three different individuals who could back your idea.
In recent years, though, it's gotten easier to find angel investors outside your own network of connections. That's because angels increasingly travel in groups. The Angel Capital Education Foundation reports angel groups now number 340, up 13 percent in the past year.
The rise of angel groups is making life easier both for angel investors and for entrepreneurs trying to find them. Here's why:
Better support for angels. Instead of making mistakes and investing on their own, angel groups provide support, education and mentoring for new angels. That's drawing more investors into angel investing, as it feels less risky. Angel investing is rebounding from the downturn -- the Center for Venture Research at the University of New Hampshire found angel investments rose 14 percent last year to more than $20 billion.
More face time. It's become less of a mystery how you get in front of angels, because more angel groups are attending -- and even organizing -- events where entrepreneurs can pitch them. For instance, the online investment portal FundingPost holds pitch events all over the country -- there are 11 events planned in the next six months. (Yes, it can cost money to participate in some of these, but for a company that's ready for investor funding, it can be money well spent.)
Specialized groups. Some angel groups are organized around a location, helping you find angels in your city. Others are organized around an industry where all the angels have expertise, helping entrepreneurs find the right sort of angels to assist their particular business type.
Bigger targets. It's simply easier to find a group of angel investors than it is to find a single angel, as the groups have a higher profile. The angel groups are also more pro-active in looking out into the business community and soliciting proposals from entrepreneurs.
Online portals. You can also find angels through online sources now, including AngelList, PartnerUp, and MicroVentures, as well as by poking around traditional social-media channels such as LinkedIn. Angels who have been active in groups are often more out-front about their investment activities in their social-media profiles.
Will you look for investors this year? Leave a comment and tell us your funding strategy.
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Comments:
Terrific article! There are so many different approaches an entrepreneur can take during the early stages. One of my favorite online destinations, LiveYourLifeMag, ran a short article suggesting that entrepreneurs ought to develop their ideas as much as humanly possible before seeking any outside capital: http://www.liveyourlifemag.com/WEALTH/ENTREPRENEUR/capital-what-is-good-for-absolutly-nuthin.html On the other hand, what if by waiting/developing, opportunities are missed? That's the Eternal Question...
It's been proven (in my experience at least) that finding investors is a very smart move in order to start a business. great post! very informative! Estiphanie Faller Freelance Writer For www.globalbx.co
The number of angels who are banding together in groups is growing rapidly, and the Angel Capital Association, which began with fewer than ten groups seven years ago, now has over 150 members. While those are the most serious, active and professional groups, there are many others in every one of the US states (and over 65 countries). The industry's free, searchable database of angel groups (and venture capital funds) is located at http://angelsoft.net, and entrepreneurs can use Kayak-like sliders to filter over 1300 groups and funds to find the ones that specialize in their type of investment, and view detailed information and statistics about their investments. Applications (usually free of charge) can then be submitted to the group directly online, making it pretty straightforward to apply for angel funding. That said, the other commenters here are correct that any type of equity investment, whether angel or VC, is challenging to come by. Angels typically are able to invest in only 2-3% of opportunities that they are presented...and that's ten times easier than receiving venture capital funding, which runs 0.2 -0.3%! Nevertheless, over 50,000 companies a year receive money from angel investors, totally close to $20 billion (which is as much as all VCs put together!) An excellent resource for entrepreneurs seeking funding is The Definitive Guide to Raising Money from Angels, by Bill Payne (formerly Entrepreneur in Residence at the Kaufmann Foundation, and the world's leading instructor of angel investors themselves.) The book is available for digital purchase at http://billpayne.com.
Thanks for adding another interesting resource for accessing angel investors, Fan!
Carol-- It is true that more Angel Investors are banding together to form "groups"…sometimes called Super Angels…but that only means they function as small Venture Capitalists. These groups want to see the same things that VCs do (the next Facebook, or Twitter), and that excludes most of the 6.5+ million new businesses that will start up this year in the U.S. alone. For most startups, investment money still must come from self, family, or friends. This is a rather sad commentary on political economics, especially when the media and the government tell us we should be starting a business instead of looking for employment.
It still very challenging to find investors, especially outside of VC hotbeds like Silicon Valley and Manhattan.
Very interesting reading, thank you for the article Carol. Related, startups and entrepreneurs seeking funding, business loans and other resources for their business might also want to join http://www.adwebix.com - a leading online service connecting entrepreneurs with investors. Members can post funding request ads, create profiles, source early stage investment deals, get more exposure, contact other members and more. It's free and easy to use.
Carol, great article. I've actually found angel groups can sometimes be a little slow moving to make decisions because they often need consensus of the majority of the group. A great angel organization is called Open Angel Forum, they've done events in multiple cities now. Basically it's local angels (who generally aren't a part of angel networks) and connecting them with local startups, but much more informal and each angel invests on behalf of themselves only.
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