Before you seek financing from angel investors or angel networks, make sure the fit is right. If you or one of your co-founders has built a business before, sold it, and made profits for your investors, you can probably break the rules. Otherwise, take note of the following guidelines:
1.) What stage are you at? In general, your chances of raising angel funding are much greater if you’ve already got a product developed. It doesn’t have to be full-blown, but the most critical features should be operational. Get that product created any way you can – with financing from your savings, your credit cards, or from friends and family, by giving away equity to partners, by bartering for services – whatever it takes. Just have it up and running.
2.) What’s the money for? As per the paragraph above, many angels are reluctant to spend money to help you build your site. They’d rather see you put their money towards proving customers want your product. Use angel money to find out what percentage of people who see your product use it, pay for it, stick with it, and tell friends about it. Have quantifiable targets in mind, and measure your results.
3.) How much do you need? An angel round is typically between $100,000 and $750,000, and individual angels tend to write checks for $25,000 to $100,000 each. Looking for less? Go back to friends, family, savings, etc. Looking for more? Either find a way to make do with less, or take a shot at raising venture capital.
4.) What’s your exit strategy? Your rich Uncle may invest because he loves you, but angels have other goals in mind. Yes, many angels get off on helping to create new business, but for the most part they are economic animals. They want a return on their investments. How and when will you turn their $25,000 into a much bigger amount of cash? You can’t know for sure, but have a reasonable hypothesis in mind before you pitch.