The expression ‘angel investor’ does not mean easy money. As per some estimates, very few, around 5% of ventures that want angel investment, are actually successful. Any investment carries risk, and thus angel investors too have strict and often personal criteria on where they want to put their money.
For angel investors, they must spread their risk so that more of their investments are successful. Some of the criteria used are the founder’s vision, the future scalability potential for growth, presence of good management, and a rich and promising target market.
The process of applying to an angel investor can be quite professional. The business should prepare their plan or brief, tell a story on why they think their idea will be successful, what problem is solved, and other such considerations. A typical angel investor may invest for several years, and then cash out or proceed to further rounds of investment. Unlike venture capital funds, they also take a personal interest in the business and share advice and play a role in the growth of business.
Angel investors can be found at several places. It is important to look around the community, as that’s where such relations are fruitful. Angel investors prefer to deal with people who are easily accessible. They can also be found at business accelerators. These are places where startups are groomed and trained and mentored.
References are however a good way to connect with angel investors. Some of them are business owners, or past entrepreneurs. They can also be found in community meetings and civic organizations. Importantly, angel investors often work in groups or syndicates.
There are several online platforms focused on angel investors and their networks. For example the Angel Capital Association is the largest network with over a thousand angel investors, and over 200 angel groups. Angel investment is one of the ways small businesses can raise important funds, apart from small loans for business.