Angel investors, those wealthy individuals who invest in the vicinity of $50K to $1M in emerging companies, represent an increasingly important financing strategy for entrepreneurs seeking start-up capital. One of the side benefits of having angel investors is that many have earned their own wealth through running successful businesses, and they are interested in "staying in the game" and finding productive ways of applying their knowledge and experience. As a result, invested angels can provide a great deal of subject matter expertise to entrepreneurs and serve as committed advisors to the company - in addition to providing much needed cash infusions.
Many metropolitan communities have angel investor communities, made up of individual investors, who are looking to fund new companies in order to gain equity stock ownership with an eye on ROI. To start the angel fundraising process, entrepreneurs should first determine if their community has angel groups - whether formal or informal.
But before presenting to angel groups, or individual angel investors, entrepreneurs should educate themselves about what makes "angels" tick - what motivates them, what they are looking for in business plans, what type of returns do they expect, etc. It's not a simple exercise, and it's important to understand the psyche of these early stage investors. So, here's a good list of books (compiled originally by the Kauffman Foundation) to dig into and assimilate so you are prepared for those important angel pitch meetings.
1. Angel Financing for Entrepreneurs: Early Stage Funding for Long-term Success. Susan L. Preston. Answers the basic questions about angel investors - their profiles, how to find them and what they want to see in business plans. Great appendix referencing websites, directories, and basic start-up templates.
2. A Good Hard Kick in the Ass: Basic Training for Entrepreneurs. Rob Adams. Think about the return on investment and not just your great technologies and products. It's a hard shift for entrepreneurs, but that's what angels are looking for. Confirm that a market exists for what you are selling, and be sure to have conducted customer research before you get in front of potential investors.
3. The Venture Capital Cycle. Paul Gompers and Josh Lerner. What is the world of professional investors, and how do VCs approach the process from the initial investment stage to exit strategies? A thorough analysis of early stage investing.
4. Attracting Capital from Angels: How Their Money and Their Experience Can Help You Build a Successful Company. Brian E. Hill and Dee Power. What's due diligence, evaluations and dilution - and how do you approach angels and benefit from their experience? A must read for talking to the angel investment community.
5. State of the Art: An Executive Briefing on Cutting-Edge Practices in American Angel Investing. John May and Elizabeth F. O'Halloran. A good collection of articles and interviews comprised from angels investing groups in the U.S.
6. Every Business Needs an Angel: Getting the Money You Need to Make Your Business Grow. John May and Cal Simmons. A time-honored book with lots of practical tips on the step-by-step interactions entrepreneurs need to take with angels. A good, hands-on reference manual.
7. Terms Sheets & Valuations: A Line by Link Look at the Intricacies of Venture Capital Term Sheets and Valuations. Alex Wilmerding. What's common stock, preferred stock and dilution and what will these terms mean to your business? A well-used guidebook for navigating investment deals.
8. The Art of the Start: The Time-tested, Battle-hardened Guide for Anyone Starting Anything. Guy Kawasaki. The get real, get current and get going manifesto for how to make a go of your start-up business. Pay attention, Guy Kawaski is everywhere and knows everyone in technology. Read his blog, too.
Shivonne Byrne, Innuity CMO
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