Basic things about Angel Investing you should know
My subscribers often ask me questions about angel investing and I want to share with you the most frequent ones.
Have you ever heard about angel investing? Angel investors invest in early stage or start-up companies in exchange for an equity ownership interest. Good examples are stories like Uber, WhatsApp, and Facebook.
Let’s proceed with the most popular questions
1. WHERE. You have a good idea and a solid business plan, but lack of investments. How can you find angel investors?
I would say there are many ways to find angel investors, including:
Through entrepreneurs, lawyers and accountants
Angel investor networks (groups that aggregate individual investors)
Venture capitalists and investment bankers
I personally think the best way is a solid introduction from a colleague or friend of an angel. Some business social network could help as well, take a look on LinkedIn!
2. NDA. Will angel investors sign nondisclosure agreements?
No. Angel investors usually see a lot of deals and you don't want to impose a roadblock to getting an investor interested in your company. I would advise you to be careful and not disclose highly confidential information.
3. HOW MUCH. How much do angel investors invest in a company?
Depends on a particular case, but basing on my experience, usual amount is $25,000 to $100,000 a company, but can go higher.
4. TIMING. How long will it take to raise angel financing?
Usually, it will always take longer to raise angel financing than you expect, as it is more difficult than you hope. You have to go through meetings, due diligence, negotiations on terms, and more. Raising capital usually is a very time-consuming process.
5. UPDATES. How often should you give updates to angel investors?
I would notify my investor monthly about any updates, changes, both positive and negative. It’s even more important to inform about bad news as it can be a way to ask for help or advice. Thus you can proceed to require any extra investments. Moreover, no one likes to be surprised.
6. DOCUMENTATION. What legal documents will be useful to review prior to investing?
Angel investors expect these documents prepared and to be in place:
Tax ID number
Stock Vesting Agreements with founders
Stock option plan for employees and directors
Stock Ledger and Capitalization Table
Organizational Board resolutions
Indemnification Agreement for directors
Federal and state securities law filings for any previously issued stock or options
Confidentiality and Invention Assignment Agreements for all employees and contractors
Certificate or Articles of Incorporation
7. BENEFITS. Angels Investing benefits for an entrepreneur
Support, advice and counsel
Contacts to venture capitalists, strategic partners
Credibility by being associated with the investor
Contacts with his or her network of lawyers, banks, accountants
Experience - knowledge of the marketplace, strategies of similar companies
These are some frequently asked questions about angel investors. If you have your question, please write it below, I would be glad to answer your questions or to introduce your project to my team at Astorts Group to be evaluated.