How to identify the right angel investor
The title of "serial entrepreneur" is one of my least liked phrases. Instead of sounding like a business person that has had a lot of businesses, it sounds like a business person who has started a lot of businesses and gotten distracted by their latest and greatest idea. I have also seen this with investors. I call it the "Shiny Investor Syndrome", where startups get so enamored with the latest investor to show interest in their idea that they forget to stay focused on investors that would be a better fit.
I have also seen startups do this with a potential angel investor. I call it the "Shiny Investor Syndrome", where startups get so enamored with the latest investor to show interest in their idea that they forget to stay focused on investors that would be a better fit. It can be hard enough to find potential investors in the first place. Getting distracted by a new angel investor, when you already have good investor leads in front of you, can cost you your reputation, time and more.
So, how do you identify the right angel investor? Here are a few of the things you should remember when looking for a potential investor.
- Spend some time qualifying potential investors. They are going to, or should, do their due diligence on you. So, make sure you do your research on them. These days it isn't uncommon for people to claim they are an angel investor when they haven't invested in a single company.
- It isn't just about the money - yes, it is important. But, I'd rather share my company with an investor that brings other things to the table beyond capital.
- Look for well-qualified investors. Meaning those that have enough discretionary dollars to not only invest today but would be able to invest in any subsequent rounds you may have.
- As I mention in my course on what investors look for in startups, investors like deals where other investors are already involved. So, find an investor that can bring other investors to the table. This can be particularly useful if/when you raise subsequent rounds of funding.
- Look for investors who have experience and knowledge in your particular field. If you are running a biotech startup, look for investors who have that type of background. Not only will it make explaining your idea easier, but that investor may be able to add some value to your business model beyond an investment.
What about you? Do you find yourself talking to any investor that will listen? Or are you more deliberate in targeting the investors you'd like to work with?