Angel investors are motivated more than just returns

Everyone has their own agenda when investing in a startup, but the vast amount of return is the biggest incentive for most startup investors. Some entrepreneurs tend to look for VCs or PE Investors to back their startups; however, angel investors may fit better when looking for connections and relationship building in a particular industry.

One of the well-renowned angel investors and entrepreneurs, Gary Vaynerchuk once said, “I’ve been critiquing venture capital for a while — it is not the only funding mechanism and doesn’t always work for smaller businesses. People should not overlook alternatives such as high-net-worth investors, angel investors, or raising capital from family and friends, and of course, look to startup grants and competitions.”

That is to say: there are many ways to fundraise at a startup’s early stage, and looking for a VC may not always be the best. That’s why Angels —- investors who use their personal fund to finance startups — is becoming increasingly popular.

An angel investor invests in the early stage to get a share of your startup. The one main advantage, apart from the cash, is that an angel investor is usually passionate about your project and may have some insights into your industry, making them a powerful advisor. Moreover, if the investor has the reputation and name in the field, it could bring extra credibility to your company.

And from the investors’ perspectives, they may have a unique reason for investing in startups and early-stage businesses — which may not be entirely returns-driven.

Angels are looking for ‘fun’ more than returns

This might come as a surprise, but for angel investors, fun is an important part of their investment. When angel investors are investing, they are actually committed to spending some time working with the startup they are investing in.

Potentially, the journey will potentially involve a couple of years of working with each other. Therefore, it’s important that the investor is getting on well with the founders, and that the business is interesting to the investor. Investors will spend a lot of time learning about the business and the industry that the business operates in. Thus, fun, or interest, is usually the catalyst that fuels angel investors’ enthusiasm.

Understanding the reasons that drive an angel investor to invest is a secret weapon in getting their interest and eventually closing the investment. Money is part of their motivation, but money is actually not the first on the list.

Also Read: Here are the 4 commandments for every angel investor’s founders meeting

“Everybody will want to take you out for lunch, ask for your advice and bring you into the decision-making process if you spread visionary influence around about the latest technologies and trends,” CIO contributor Pavel Cherkashin wrote in his article, “Once the trend takes hold in media outlets like TechCrunch or Wired, it becomes public domain and everybody is talking about it. But 6 months before, that trend could only be seen on startup demo days, pitch sessions and in acceleration programs…”

Having the initiative and responding proactively is where the fun comes out of, especially when an idea is still in at the seed stage when nobody has an idea of how it will grow. It is these unsettled factors that make the fundraising process exciting and fun.

Angels could be everywhere

Another thing to bear in mind for early investment seekers is the way to spot and approach potential angel investors. Unlike VC and PE investors, angel investors do not write the title “Angel Investor” on their faces, and sometimes, not even on business cards or LinkedIn profiles. They could be everywhere out there, at an industry event, on a panel, or in the crowd. Occasionally, you meet an angel investor but you never know until the person turns around the table and says that he/she is an investor and would like to talk more about investing.

“Angels are everywhere, you just need to find them magically,” Said Brian Hirsh, CEO of Brightwood, on a recent panel discussion organized by Hardware Massive in Shenzhen, where he continued, “They might be at a random dinner table.”

Brian also shared his perspective on looking for the right angels. “Good angels match up with your industry and their check size is right,” Hirsh, “An investor who writes 200 million dollars check will not look at projects that are asking for 2 million.”

Also Read: 7 steps to increase the value of your business (before you sell)

Tully Gehan, who moderated on the panel discussion also mentioned that fundraising email might be too dismissed. “There has to be someone who is good at marketing to help you networking in the industry and finding the right person who writes checks,” said Gehan.

Looking for the right angel investor could be a tedious process but essential.Having entrepreneurial support at the early stage from right investors and professionals is what a startup really needs.

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