What is an Angel Investor? Originally “Angels” were referred to people who financed broad way plays when all else failed. Today this term has become common among the investment community and refers to high net-wroth individuals that invest their own person funds in various businesses. In Canada, there are well over 200,000 potential angel investors that annually invest about $3 billion in Canadian businesses.
Angel investors are individuals who invest their own capital in fledgling businesses, both in the technology and non-technology areas. Research shows that such individuals typically have run their own small businesses, have significant net worth and income, tend to be college-educated and are extremely discerning in the projects they will invest in. These Angels typically invest in a business after the entrepreneur’s “love capital” (capital from relatives and friends) has been
Why should you use angel investors? As an entrepreneur, you have likely noticed the growing resistance of banks to finance small businesses. It is virtually impossible to obtain financing without having secured assets, providing personal guarantees, etc. Angel investors are the logical source to provide financing to small business.
Angels primarily invest in early stage companies that have a strong management team, have a viable product/service that has a high market potential, have a product/service that is one of its kind, have a pre-money valuation of $10 million or less, and most angel investors seek to invest close to home-within a 150-km radius of where they live.
The amount of investment per company ranges from $10,000 to $150,000, although investments may range upwards of $500,000 to $1 million.
Angel Investors allow entrepreneurs to:
- Find a source of capital.
- Find an experienced investor that can provide guidance and support.
- Make it all come together in a fast and efficient way
How will you attract the attention of potential investors? Angels will need your answers to these questions before they will even consider helping you. At least your proposal should address the following:
- How much money do you need?
- Why do you need it?
- What are you willing to give up to get it?
- When and how can you pay it back?