Angel investors consider all of these details when deciding whether or not to invest in a company.
Entrepreneurs get the capital they need from investors when their ventures align with the investors’ standards, criteria and preferences. When trying to attract investors, it is important for business owners to consider their industry type, amount of capital needed, stage of company development, geographic location and other factors. Angel investors consider all of these details when deciding whether or not to invest in a company.
Geographic location is important to angel investors for a number of reasons. Close proximity allows them to visit the businesses in which they have invested, allowing them to regularly communicate with the management team and witness their investment progress. Living near their investment also lets angel investors “source” deals using referrals that they trust and know, like other local angel investors, business associates, accountants and others.
Angel investors are attracted to start-up companies that have the potential to grow into mid-sized or large corporations. They may invest $25,000 to over $500,000 on these ventures during either the launch period or later investment rounds.
Industry and Market Influence
Angel investors are more likely to put money into industries in which they have experience. They also take a close look at the market’s need for specific products and services. The start-up company seeking funding should demonstrate solid potential for growth before reaching out to an investor, as a growing market is essential to profitability. Companies seeking angel investors should produce services and goods that are unique, competitive and in line with consumer needs.
Projected Rate of Return
The overall goal of angel investors is profitability. They know that start-up businesses are risky investments, so they must justify that risk by investing in companies with high projected rates of return. Some angel investors seek companies with a 25 percent of return annually while others may have an even higher standard.
An entrepreneur’s presentation to angel investors should include an exit strategy that outlines the ideal estimate of time for liquidity for investors and an exit. The most probable exit strategy presented is often a company merger or acquisition of a company, but sometimes company revenues may suggest an IPO opportunity.
The investment preferences of angel investors vary widely, but most investors are looking for solid companies with strong management and potential for growth. The most important part of gaining angel investors is to do plenty of research and ensure that your company meets the individual preferences of each angel investor you approach.