February 9, 2012

Finding Angel Investors without Advertising

Finding Angel Investors without Advertising

Thomas Su, ResearchWhitePaper Group, Inc.

Thomas Su

 

Many rules have restrictions in preventing advertising of your opportunities – so, how do you find angel investors without advertising to the public?

For many capital seekers, they also find that the marketplace is inefficient in terms of finding angel investors for their business.

Entrepreneurs looking for angels must be creative in figuring out ways to get their executive summaries around within the limits of the law. An SEC rule forbids “general advertising and general solicitation” for investors in privately held companies. (Start-ups, by definition, are privately owned.) As a consequence, angel access to interesting deals has been hit-or-miss.

If you don’t make the effort, you don’t have a fair chance of reaping the rewards; and the rewards can really pay off as well.

Angel investors are active investors!

On the other hand, the good news is that angels have a clear field in the early-stage sector.

To find angel investors, you usually engage in what is euphemistically called networking — going to industry events and rubbing elbows with the other participants with the hope that some of them will be looking for investments, mining professional relationships (asking your lawyer and/or accountant for leads, for example), and exhausting your Rolodex.

Local business associations are the most common way to get plugged in, but the networking process takes a lot of time — usually more time than is available after you’ve started operations.

Start your networking before your business

Although business consultants will usually suggest that you set up a business plan as the first step for a business, some business founders will suggest you should establish your contacts well before you even start your business.

Below are some steps we have gathered from various founders

Share your existing contacts

When we set up our first private equity fund, the first thing was to pull out every single business card amongst the three of us (the co-founders), then we built a spread sheet on how we were going to introduce our business to each one of them.

For each contact we had – we assigned: Investor, Business Partner, Customer, Marketing partner. Then put in motion our introduction strategy steps, ex. send introduction letter, mail prospectus. etc.

This is a good way to build up a To-Do list – and back then, CRM was not as advanced as these days, so, we just did it on a very simple spreadsheet – you can now use CRM tools which are much more powerful – if you do use them.

Your professional networks

Amongst our contacts – there are many professional contacts – lawyers, accountants are especially useful for us – as they have their own networks. Through our networking with accountants, we managed to find several prospective investors interested in our business – and through our lawyer, we were introduced to an international investor who wished to invest as part of the immigration process.

Your other networks

The next thing to do is to go through your business networks, and this includes your business partners, your clients. I raised capital from a stockbroker who liked our investment process and decided to put some money into.

We sent out a newsletter to our clients as we also had a newsletter business at the time – we received quite a few inquiries about investing in our company, as the recipients have been following what we do.

Angel investors can often come from the least unexpected sources, so open up and reconnect through as many networks as you have.

Business executives and connections

This is a really good source for either investors or business partners. Build up a database of CEOs, COOs, CFOs and CTOs of companies that you believe could help.

Again, investments can come from the least expected sources. One of my clients runs a successful environmental venture capital fund, he raised his capital from Al Gore’s climate change private equity fund, which was not a surprise; but 2/3 of the capital was raised from 2 executives – one runs a telecommunications company, and one runs a property development company – neither company are involved in the cleantech industry.

So, how did he find these two investors; he searched through news on major donors of climate change functions – and found two companies who were not major donors but whose directors were extensively involved in sustainable energy and forestation projects on a personal level.

After 2 years of running the fund, he received a substantial injection of capital from another 2 executives in the mining industry using the same tactic.

These days, the power of social media has made things much easier. You can connect to other executives much easier and more quickly. But have you really looked at your connection deeply?

You will be surprised that you may have 10,000+ connections in your networks already before you even know it.

Social media networks is just like a giant Rolodex (business card holders for those outside North America); combine and share your networks with other co-founders and business partners, and you may find many angel investors are actually in your networks already.

Set up business executive directories and identify potential partners from established companies; also pull out lists of exhibitions or events and check out who the keynote speakers are for your industry, that can also quickly identify potential angel investors as well.

Hopefully you find these strategies useful to find your angel investors.

 

About ResearchWhitePaper Group, Inc.

ResearchWhitePaper Group, Inc. is a global research organization specializes in providing analysis and research into venture capital, private equity and emerging industries. It has produced various strategy reports, ebooks and databases, more information can be found on our site.

Share

142 N. Milpitas Blvd. Milpitas, CA 95035, 408-475-8260 • 360 Thames Street Newport, RI 02840, 401-398-2929 • 416 S. Main Street Hailey, ID 83333, 208-788-8260


Login