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Start Your Business Startup Funding

Top 3 Reasons Angel Investors Will Fund Your Company

Top 3 Reasons Angel Investors Will Fund Your Company
Credit: designer491/Shutterstock

If you're looking for an angel investor to fund your business, you may want to consider exactly what the investor is looking for to improve your chances of success.

Angel investors are individuals who invest in early stage or startup companies in exchange for an equity ownership interest. In a Business Insider article, renowned investor Ben Horowitz explained that, unlike traditional venture capitalists, angel investors usually invest smaller amounts of money, make their investment decisions quickly, and rarely require a board seat as a condition of investment. This makes them an attractive funding option for startups that don't need large investments and want to retain more control over their business.

A survey by Propel(x), an online angel investment platform, revealed the top three reasons angel investors choose a specific business.

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Exceptional management is vital for any business. Three-quarters of survey respondents said the management team of a startup was their biggest consideration for investing.

"Startups are not only about the technology or business idea but also very much about the people behind them," said Swati Chaturvedi, CEO and co-founder of Propel(x). "A compelling, experienced team that can sell the vision and the potential impact is key to success, and something savvy angels look at closely."

Some exceptional qualities to have as part of a management team are integrity, clarity of strategy and approach, professionalism and determination, Chaturvedi said.

Angel investors want to understand exactly what they are financing, especially for startups in the tech field. More than 50 percent of respondents claimed this as one of their top reasons for investing, and 94 percent find it helpful to have subject-matter experts explain the technologies within their company before investing. In fact, many choose not to invest in specific businesses due to their inability to grasp their technology efficiently.

"The easier we make it for angel investors to discover, evaluate and participate in science and technology startups, the more we'll see money going into these worthy companies and the benefits to humanity accrue," Chaturvedi said.

Naturally, angels look for opportunities that will benefit them as well. Forty-nine percent ranked potential ROI as their top motivator for making an investment decision.

While some investors are indeed looking for financial compensation, not all are primarily interested in just the money. Some want a different kind of return: The ability to solve the world's biggest challenges through the businesses they fund. Nearly one-third of angels will choose to invest in a company based on its connection to important social issues.

"Having an impact matters, especially when it comes to investing in things like curing diseases, feeding a growing global population, fueling the planet with clean energy and even taking us into space," Lisheng Wang, Propel(x)'s co-founder and head of investor development, said in a statement. "Science and technology startups especially should take note that when raising capital, they should emphasize the impact of their solution besides potential returns to investors. It's not only about the 'what,' it's also about the 'so what?'"

This survey was based on the responses of more than 200 active and aspiring angel investors.

Want more tips for attracting an angel investor? Check out this Business News Daily article.

Editor's Note: Looking for information on business loans? Fill in the questionnaire below, and you will be contacted by alternative lenders ready to discuss your loan needs. 

 

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Sammi Caramela

Sammi Caramela is a senior at Rowan University with a major in writing arts and a double minor in journalism and psychology. She is President of Her Campus magazine and I Am That Girl at Rowan, and contributes to other writing platforms on and off campus. She expects to graduate in 2017 and continue her freelance work with Business News Daily. Reach her by email, or check out her blog at sammisays.org