How to land an angel

I see startup founders seeking out angel investors when they find VCs don’t respond to them or if they feel they’re too early for VCs. Chances are they might not have even worked their idea through.  

Here’s how they go. “I’ve got a great idea and have filed for copyright.  Now I am looking for an angel investor”. Scrape it a bit and you get what they mean – “ I am clueless how to raise the money. My mails to VCs didn’t get a response.”  They don’t satisfy the VC criteria of developing a proof of concept, beta tested product or have any early customers willing to pay a price.  By extension it means, “All I have is a pre-alpha prototype and I certainly don’t want to bet my money on it, leave alone my farm.” 

In short, (s)he wants others to run the risk of investing in his/her barebones.  VCs didn’t perk up.  Somehow they think angels would. 

I think it is borne out of a confused notion of what Angel investors are.  Angels have wings and they roamed the skies as far as I know.  Angels never walked the earth and they certainly don’t wear a badge. You just call someone an angel when (s)he touches you and get you out of distress. That would mean you recognize an angel after you are touched by it. 

Now you draw a parallel and add the word “investor” to it. What do you get? A bunch of experienced investors who made a fortune for themselves from a combination of hard work, an innate astuteness and application of enormous intelligence they came to possess. They’re quick witted, have taken some early risks that got paid off. They are so shrewd that they see right through you from a mile. Would you think they will bet away their hard gotten resources or apply them without a thought? Get a life, folks! 

That leaves the question – how to land an angel… 

First, look closer home. Your family is the first band of angels. Try getting your dad interested.  See if he’s willing to bet some money on your idea. Then try some of your relatives and close friends. Even if you score 6 on a scale of 10, you know you are investment grade.  You clearly make the cut. Now look for people from the same industry, your teachers, professors – it might stoke their interest, you never know. If they’ve taken that road before, they would certainly appreciate your hard work and the value you carry. They will seize the opportunity if they think that they can add value and make it a hit. Word spreads. You may not hear a knock on your door just yet, but I suggest you leave it ajar.  

Keep chipping away. Soon, you’ll sense a flash of bright light slipping through the door (or it could be your inbox) and you know you’re being touched.   

Recognize the angel.

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3 Responses to “How to land an angel”

  1. satpal Says:

    I agree with what you said Krish.I would like to add that most of the time people do go to their parents, friends ( stupid but wealthy type, and wealthy but greedy type).This not becoz it is easy to convince them but becoz they dont ask for 30 % equity.

    Personally I believe that it is much harder to ask for money from any one who know you very well.Thats becoz he will judge you not the product or opportunity.They will associate every thing with your past actions, behaviour and have baised which may go against you.

    Secondly it very hard to negotiate with parents,frineds,relatives.In such dealing other party may put too much of emotinal equity then require or what u can handle.

    Ideal angels are entreprenuers or successful executives of large organisations.They bring hard gained knowledge, connections, and experience with them.Smart money they put in will be of greater value then what ur friend or parent will invest.These angel will ask you right questions and will be more actively involved.

    Lastly you can ot take a outsider and his money for granted.Nobody will like to mess with people who are our connectors and doing free PR for you.

  2. Krish Says:

    Satpal,

    I appreciate your insight. Let me walk your comment para by para…

    When investors commit their resources in a startup, they take an above average risk, foregoing far less riskier bets that are available. The tough compromise is spun out of higher return expectations commensurate with the greater risk levels that they shoulder. You can get away ceding a lesser stake if you choose to take it later in the day. It’s always the founder’s choice when to let in an outside investor. If you worry about equity dilution, the only way out is to bring your own funds in at this stage. Earlier the stage, greater the dilution levels.

    By seeking early investments from people you know and trust, they know what they are letting themselves in for. That way they take least personal risk, if at all it’s only a venture risk they’d have to assume. No regrets again.

    You say it’s very hard to negotiate with parents, friends and relatives…? Wait till you meet a serious investor.

    The one that shows up will have one distinct trait that’s anything but angelic. He certainly sees more composite value in your idea, team and its execution skills that you don’t see yourself. In my experience, founders never choose angels, it’s often the other way round. I would rather say, startup ideas are almost always bought, never sold.

    Lastly never delude over the free lunch or free PR. There’s none that comes free. Everything is factored in the risk-reward. It’s a zero sum game out there, somebody wins, somebody loses. So, chin up….

  3. srinivas Says:

    Krish

    very well said , valueble information

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