Angel investors can bring more than just cash to a startup. Many are former founders themselves or have operator experience (in sales, tech, finance etc.) that startups really need.
The key is to find angel investors who believe wholeheartedly in your business and seek to support, rather than undermine you — otherwise the arrangement is just never going to work, says Karoli Hindriks, cofounder and CEO of Jobbatical, an immigration and relocation platform.
Decide what you’re looking for
If you’re a very early-stage company, you might just be looking for your first believer — someone who understands your business and sees its potential. If you’re at a slightly later stage and growing fast, you might be looking for experience and expertise in a specific industry.
In our case, we have Joe Zadeh, former head of Airbnb Experiences and the company’s ninth employee, on our cap table — he helped to build up Airbnb from scratch and I knew his experience would be invaluable.
In general, look for angels who have a vested interest in the success of your business, can introduce you to important connections and who will be a good mentor to you.
Make your move
Have a look on LinkedIn and identify the angels you want to approach. Maybe they’re someone you admire in your industry, or a founder who has exited their company and knows what it’s like to be in your shoes.
Of course, it’s always better to be warmly introduced to an angel via someone in your network — check if you have mutual connections with the angel on LinkedIn and ask to be introduced — but this isn’t always an option for founders. There’s nothing wrong with reaching out "cold" via a LinkedIn message or email: it’s worked for me in the past.
Don’t send your pitch deck straight away
Warm them up a bit first. If you’re reaching out for the first time (especially cold), introduce yourself and your company briefly, and then tell them that you’ve been following their work and believe their expertise is exactly what you need. Show them that you have thought through why they are specifically interesting to you. (Of course, that means doing your homework and being wised up on the ins and outs of their career.) Then, invite them for a coffee.
The way you approach angels is a lot more personal than VCs; you have to get under their skin a little bit before you can move into sales mode and pitch your company to them.
Observe early red flags
One of the biggest warning signs I’ve seen is when an angel does not understand equity. Some, who are perhaps less experienced, ask for an enormous percentage of equity at the beginning — some of my first angels in the very early days of Jobbatical initially wanted such a big share that we would have given away 40%+ of the company — which can make it impossible for you to raise money at a later stage. (If you give too much equity away at the beginning, you have to give more and more of your own equity away in order to leave VCs with a meaningful portion. Otherwise, they won’t invest.)
If an angel tries to make demands regarding management, company decisions or use of the funds in early discussions, this is also a red flag. If you are already not aligned on these crucial aspects of the business, it doesn't bode well for the future.
Pick those you can trust
As a founder, there are times when you’re so down and you feel so alone. But if you can identify angels in the beginning that have a good energy, a calm approach and a willingness to make a deeper connection with you, they can become your go-to people when you want to cry and shout.
Covid-19 was pretty lethal for us, being a business that helps people relocate across borders. But my angel investors were a sounding board for me during those tough times and helped me navigate my way through the situation.
Get legal counsel
Once an angel is serious about investing in your company, there are a few things you'll need to get out on the table: the amount of money you need, the portion of equity the angel will take, the investment time frame and also who has decision-making control. If you can, consult a lawyer about the terms of the angel’s investment — especially if this is the first time you're getting angel funding — to ensure you are protecting your business.
On the subject of... Finding angel investors
😇 Finding angel investors 101. This article lays out how to find, approach and pitch to angel investors.
🔭 What should you look for in an angel investor? Industry experience is important but so is the quality of mentorship they can provide.
🪥 Brush up your pitching skills. Startups and investors share their advice for pitching angels as an early stage business.
💵 Operator angels are forming syndicates. A bunch of new ones have emerged in Europe — and they are eager to invest.
🙃 Female angels remain a minority. Just 14% of angels in the UK are women, though they are still helping get startups (particularly fintechs) off the ground.