For entrepreneurs seeking capital, imagine one day a kind person walks up and says, "Your business is really interesting, I'd like to invest. How much do you need?" If this were to happen in real life, it would feel like a dream...
But did you know these "kind people" really do exist? In the investment world, they are known as "Angel Investors." These are investors with money, ready to fund, but like angels, they aren’t easy to find. However, there are ways to locate them.
In this article, A2D Ventures will discuss Angel Investors, the dream investors for entrepreneurs, what they typically look for when deciding to invest, and how you can find one.
What is an Angel Investor?
An Angel Investor is an independent investor with both capital and experience. Most often, they are people who have run their own businesses or currently own one, and one day they decide to invest in other businesses for personal security or to complement their business portfolio (also known as synergy). They provide seed funding to startups, offer advice, and support the business toward success.
You might wonder why these angel investors are willing to invest in small businesses with no guarantees of success. The answer is that investing in such startups, if the business game is understood correctly, can be like winning the lottery.
Take the classic example of Google, which started as a small startup and attracted investment from Andy Bechtolsheim and David Cheriton with $100,000 each. Today, Google has made them billions. So, an Angel Investor must be experienced and wise enough to invest in early-stage businesses, and of course, these types of investors are not easy to find.
How to Prepare Before Pitching to Win the Angel Investor’s Heart?
Assume you now know what an Angel Investor is, so what’s the next step? You need to pitch your business plan to an investor. How do you prepare?
Phawut Phongwittayapanu, the Managing Director of TARAD.com, an e-commerce businessman, and one of Thailand’s Angel Investors who has funded many startup companies, once said in an interview:
“What I look for are two things: A good business model and the passion of the entrepreneur.”
It sounds simple, but when you break it down, a good business model should:
Be different from others, with unique thinking.
Be scalable internationally or adaptable to other markets.
Have a medium-to-long-term revenue model.
Have an interesting team, because Angel Investors invest in people as much as in the business.
Additionally, entrepreneurs should consider the investor’s interests. Ask yourself questions like:
What has this investor funded in the past?
What businesses is this investor currently involved in?
What business trends or sectors are they interested in?
What expertise do they have?
How does your business align with the investor’s goals?
Is your financial situation compelling enough to capture their attention?
What does their deal flow look like?
Understanding these aspects will help you tailor your pitch.
How to Find an Angel Investor?
The big question: “How do you find an Angel Investor?” As we know, these investors aren’t easy to come by, and approaching them without prior connection often results in rejection.
Robert Lomnitz, the Chairman of Bangkok Venture Club, once said at a SET seminar that if entrepreneurs want to attract Angel Investors, the first step is networking. You need to build familiarity with these investors through LinkedIn, alumni associations, or investment seminars often attended by Angel Investors. Keep an eye out for these events and register to increase your chances of meeting these investors.
Another important step is to create an attractive profile. Often, Angel Investors don’t just invest in businesses; they invest in people. Presenting your passion along with your business can make a difference in catching an investor's interest.
Alternatives to Angel Investors: Other Funding Options
By now, entrepreneurs may feel it’s difficult and time-consuming to find an Angel Investor. So, are there other ways to raise capital for your business in the meantime?
The dream funding source isn’t limited to Angel Investors. Today, there are many alternative funding sources for businesses to pitch to, ranging from private capital markets to traditional financial institutions. While waiting for an Angel Investor, these options can help entrepreneurs build profiles and funding opportunities.
Crowdfunding (CFD)
Crowdfunding involves multiple people contributing funds to a business in exchange for certain returns, such as shares or bonds. Similar to Angel Investors, crowdfunding pools funds from several contributors, offering more substantial funding.
There are several angel investor networks in Thailand. A2D Ventures is one with a streamlined platform that helps entrepreneurs raise funds and provides passive income opportunities for investors.
Venture Capital (VC)
Venture Capital is a group of organizations that pool money from investors to create a fund, which is then used to invest in businesses. Unlike Angel Investors, the fund manager, not the investor, decides where the money goes. Typically, VCs invest in companies with established revenue in exchange for equity or high dividends, offering large capital but more structured terms. Early-stage businesses may not be suitable for this funding source.
Traditional financial institutions, such as banks, also offer various loan types. We’ve also made a comparison table to help entrepreneurs assess the pros and cons of each funding type.
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