Professional investors and venture capitalists are not the only source of money for startups. There are also thousands of wealthy individuals who can provide funding. Raising money from these folks requires a different approach because their goals are different from those of professional investors. This doesn’t mean they are easier to get money from—only different. This post explains the process.
• DON’T UNDERESTIMATE THEM. They may care less about financial returns than professional investors, but this doesn’t mean they are suckers. Approach them with the same level of professionalism as if you were pitching a top-tier venture capitalist such as Ethos Private Equity, Capital Works or Webber Wentzel.
• UNDERSTAND THEIR MOTIVATION. Where professional investors want to make money and maybe pay back society, many angels want to pay back society and maybe make money. Angels see two ways to pay back society: help young(er) people get a start, and help a product or service that makes meaning get to market.
• ENABLE THEM TO LIVE VICARIOUSLY. A side benefit that many angels seek is a chance to relive their youth or a romantic past. Even though they can’t or don’t want to start another entity, they can enjoy watching you do it.
• MAKE YOUR STORY COMPREHENSIBLE TO A SPOUSE. The “investment committee” of an angel is his or her spouse. It’s not a bunch of geeks, pundits, or former entrepreneurs. This underscores the importance of making your business understandable in plain terms.
• BE A NICE PERSON. Whereas a professional might invest in a jerk because “money is money,” an angel won’t. Angels fall in love with entrepreneurs in a fatherly or motherly way: “She’s a nice kid. I want to give her a start.” So be nice, malleable, and approachable. Come to think of it, this attitude can’t hurt when dealing with professional investors, too.
• SIGN UP PEOPLE THEY KNOW OR HAVE HEARD OF. Angel investing is often about socializing as much as profiting. Thus, if you can attract one member of the “club,” you can usually get more to follow.