Angel Investors: The First Money In for Startups Most startups require external capital beyond what can be raised from family and friends; when this is the case, angel investors step in. Investors are high-net-worth individuals who invest their own funds in startup companies, while providing mentorship and advice to these new businesses. Locate potential angel investors by creating lists of those with expertise and connections in your field. Schedule meetings without immediately using conversations to ask for money. Investing in Startups: Angel investors invest their personal wealth in startups and early-stage companies, typically working alone and not reporting to a venture capitalist firm. Angels may possess industry-specific knowledge and serve as valuable strategic advisers. Business angels carefully evaluate startups by considering factors such as the strength of their founding team and track record, growth logic and market entry barriers, trends that may disrupt industries, and a company's efficient scaling model that can grow swiftly and efficiently. Entrepreneurs meeting with angel investors often do not use this meeting to solicit money; rather, they share their executive summaries and business plans while seeking advice. Angel investors tend to focus more on understanding the business behind an idea or technology than on the idea or technology itself; therefore, they will typically waive non-disclosure agreements when first assessing an investment company. But once a company has completed final due diligence, it may need to sign an NDA. Angel investors will use this stage of due diligence to examine intellectual property issues. If a business owns patentable technology, it may require the business to sign an NDA; otherwise, it will examine legal and financial documents to establish share allocation and pricing strategies. Investing in Technology: Before your business becomes profitable, it will require outside capital in the form of equity (share of your company) or debt financing to keep operations and growth underway. Early funding typically comes from family and friends; once your capital needs exceed their capacity, you may need to seek investors through angel investment networks or crowdfunding platforms such as Indiegogo or Kickstarter. Angel investors are experienced businesspeople who invest their own money in early-stage startups in exchange for equity. Angels provide valuable advice, mentorship and industry connections that may aid your startup as well as introduce you to other entrepreneurs or potential customers who could assist its expansion. Angel investors differ from venture capitalists in that they invest their own personal funds directly, typically writing smaller checks of $25,000 or less per investment. They tend to make earlier-stage investments than VCs - often investing solely in an idea or prototype. Becoming an angel requires an in-depth screening process that involves reviewing executive summaries or business plans without signing non-disclosure agreements. If your opportunity reaches the final due diligence stage, they may request full business plans or meetings with you. At that point, they may prepare a term sheet that serves as guidance to lawyers when creating investment agreements and outlines the relationship between you and their angels. Investing in Social Impact: When a company's capital needs exceed what friends and family alone can provide, outside investors, such as angel investors, may be necessary. Angels provide this assistance by investing their personal funds in exchange for equity - often as part of an investment round led by venture capitalists (VCs). Investors may also make loans that convert into equity later. Angel groups exist so investors can more efficiently evaluate startups and make investments more quickly. Angel investors may take an active or passive role in managing their investments, depending on their preferences, but most conduct extensive due diligence on startups they believe have growth potential. They seek out startups with unique products and potential scale, passionate teams that demonstrate excellence, and clear paths to profitability or an exit strategy. Angel investors have an increasing desire to invest in businesses with both social impact and profit potential, such as Husk Power in India, which offers pre-paid energy services to poor urban and rural communities for just Rs 15/month - helping improve lives while creating jobs and offering its solar technology expertise as an example of such a venture. Such an investment can expand profitability without detracting from its mission. Investing in Health Care: Angel investors often provide the initial funding for health care startups. Angels are high-net-worth individuals who invest their own money in early-stage companies in exchange for equity or convertible debt and can help bridge the gap from seed funding (provided by founders, family, and friends) to professional financing from venture capital firms. Angel investors often come from within an industry or are former entrepreneurs themselves, making them adept at using their experience to assist newly founded businesses and offer them guidance. Angel investors also often have connections to customers, other funding sources, and business partners that they can leverage as resources when making investments - generally expecting a 15%-25% ownership stake in any given venture they invest in. Before seeking investment from an angel group, companies must first pass pre-screening by the staff or a committee of members. This may take several weeks and helps weed out applications that do not meet the general criteria set by that angel group. Investors can locate angel investors through referrals from trusted contacts, business acceleration and incubation programs, investor conferences or symposia, and online searches for angel groups based on industry, product, or location.