• Angel Capital Association unites the many loosely organized Angel Investor groups across the country.  This should be your first stop and is a good resource for all things Angel.

• AngelSoft.net is a tool that many of the ACA groups and other Angel Investors use.  You can connect with investors directly through this tool.  Be ready to upload a lot of information for the investors to peruse.

• Angel.co is a tool that is very similar to Angelsoft.net, but is more focused on the small, individual investor.  It has received high praise from entrepreneurs and investors alike and is a vehicle by which you can get funded rather quickly.

One example of a technique that can work wonders is to publish press releases in a forum that the national press will pick them up.  PRWeb is one such forum.  The content of the press release is absolutely critical to attract the right attention, so make sure you’re publicizing the right information.  Investors want to hear about disruptive technology, defensible intellectual property, and profitable startups,  so if your startup was recently granted a patent (even if it’s a provisional patent), partnered with a renowned research institution, or just signed some big deal with a brand-name client, get the word out ASAP!

Q: Do Angels want to see revenue projections?  Aren’t projections just guesses?

A: Absolutely.  If they’re experienced investors, they know just as well as you do that these projections are subject to change at the drop of a hat.  However, providing these projections, and more importantly, the reasoning behind them, shows the investor that you understand your business and you (hopefully) have a grasp on what is and isn’t realistic.

Q: How much of my company’s ownership should I give up to an investor?

A: Enough to make it worth both you’re time.  Technically, this amount is based on the value of your business (almost always a point of contention in an investment round) and the amount invested.  Crudely, investment/company value = percent ownership you’re giving up.

Q: What is convertible debt and why does my investor want to use it as the investment instrument?

A: Convertible debt is quickly becoming the investment tool of choice for most early stage investors.  It’s name is pretty self-explanatory: it’s debt that, at some point in time converts to equity.  The reason it’s popular has to do with the risks and rewards of investing in companies.  To protect the investor, if things go bad, the debtors will be repaid first in liquidation.  If things go well, the debt can be converted to equity, so the investor shares in the upside.  Be sure to have an attorney or qualified advisor explain any convertible debt instrument an investor proposes to you so you have a clear picture of how all this will play out in your situation.

Q: How do I create financial statements (or projections) for investors?

A: For most early stage companies, there are little assets to show on a Balance Sheet, and often operations aren’t robust enough yet to support creating a Cash Flow Statement, so most investors will look for an Income Statement as the minimum financial statement you need to produce.  Check out our Investor Information Package category to learn more about producing it.

You should be constantly building your network

As an entrepreneur, you must meet as many people as you can.  This means that, whether you like it or not, you have to network, network, network.  It’s a simple matter of statistics.  Investors typically invest in 1 out of every 100 deals they see (in the best case).  That means you have a 1% chance of getting money.  Well, simple statistics will tell you that if you add 1% that one investor represents with the 1% that another investor represents, you have a 2% chance of getting funded.  Now, unfortunately for us entrepreneurs, it’s not as simple as meeting 100 investors to be sure we’re going to get funded… but you’re going to have a MUCH better chance if you do than if you only meet 5 or 10.

What does this mean for you?  That you have to go to ever single event that you can and make sure you’re ready to give your elevator pitch.  One other important thing you should be aware of is that because investors get pitched ideas all the time, it might behoove you to not be too aggressive about your pitch.  Be assertive and introduce yourself, show a genuine interest in the investor, and make it plain that you are an entrepreneur seeking funding, but do not be pushy.  You’ll have a much more interested audience if you build rapport with the investor first.  Be likable, and your pitch stands a much better chance.  Remember what investors do… they invest in PEOPLE, not ideas.

Now, how are you going to find your networking opportunities?  Well, find investor functions, join your local chamber of commerce, network with other entrepreneurs, and get involved with your local incubator.  If there are no incubators in your area, find out what small business development programs your local government offers and get involved with those.

Another great place to meet potential investors is through professional service providers.  This technique works best with independent providers.  That is to say, Merrill Lynch may not be too interested in providing you with an investor from their client list, but Joe Smalltown CPA might.

Finally, use your personal network.  Alumni associations are a fantastic source because they often have events to get alumni back together.  Better yet, get involved with the alumni office… they know which alumni have the extra cash available for a high-risk investment like a startup.

Okay, so now you’ve got your network to get some capital… but what about all those other people you met along the way?  Should you throw those business cards in the garbage?  Well, I think the answer is obvious.  Once you’ve gone through this process… even part of the way through, you will have found that those contacts are just as valuable, if not more so, than the investors.  This is because those contacts are your potential future clients, suppliers, and service providers, all of whom can help you build your business.  So save those cards!

Networking is important in business, but for an entrepreneur, it’s absolutely crucial.  Get out there, be confident, be assertive, and be friendly, and you will soon have a fantastic network that will get your business growing and, with a little luck, funded!