Angel Investing 101

Do you need an angel investor? But how do you get it? Here then is Angel Investing 101.

Finding the money you need for your business is usually a challenge, although not always. I am reminded of this great story out of the Silicon Valley some years back:

In 1996, Larry Page and Sergey Brin were Ph.D. students at Stanford and had started working on a research project that analyzed, among other things, the number and quality of sites that linked to a particular web page. Page and Brin soon saw that the pages that had the most sites linking to it on a given subject were among the most relevant in a search engine query; after all, if a lot of sites linked to a page, that page must be useful, right? Page and Brin then decided to use this information to create their own search engine, using, at first, the Stanford website. The URL?

The URL was not registered until the next year, 1997, and the company did not even incorporate until 1998, and even then, it did so only because it had to. The reason was that Page and Brin had met angel investor Andy Bechtolsheim that year, gave him a demonstration of Google, and Bechtolsheim decided to invest in their nascent company. Bechtolsheim wrote out a check in the amount of $100,000 to “Google, Inc.”

Given that Brin and Page had been financing the startup with credit cards up until that point, this was an extraordinary turn of events. According to Contact Magazine, “The investment created a small dilemma. There was no way to deposit the check since there was no legal entity known as ‘Google Inc.’ It sat in Larry’s desk drawer for a couple of weeks while he and Sergey scrambled to set up a corporation.”

So yes, finding the money is not always difficult, but back here on planet Earth, it usually is. That’s where angel investors like Andy Bechtolsheim come in. At the right time in your business cycle, angels can make all the difference.

So the question you now probably have is, where does one locate angels?

The first place, and often the best, is through networking. Speak with friends and family, with your accountant and lawyer, with real estate agents, bankers, customers and clients, with people where you worship, with sales reps and business associates. This sort of informal networking often works well because 1) these people know you, and 2) you can get a personal introduction to any potential investor.

Beyond networking, there are a variety of other options available to you:

Small Business Development Centers (SBDCs): SBDCs work in conjunction with the SBA and local universities to offer information and assistance to businesses and startups. And because the businesses that work with SBDCs are affiliated with universities (because of the SBDC connection) and because angels like that, SBDCs are a good place to look for angel investors.

Social media: Social media is increasingly playing a significant role in matching angels and entrepreneurs, so have at it: Create a robust profile on LinkedIn and begin to network. Tweet up a storm. Create a Facebook fan page. And if you can’t directly get in contact with the investor of your choice, see who they are connected to and look to connect with them.

Online angel groups: Maybe it is no surprise that a host of online groups have cropped up in recent years to facilitate the introduction of entrepreneur and angel investor. A Google search will provide you with a list to choose from, but here are a few to help you get started:

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