Financial angels are wealthy, experienced businessmen who invest time and money in a fast-growing company in exchange for a stake in it.
It is estimated that there are between 5,000 and 10,000 angel investors in Israel. In addition to those who go public, there are many who invest without announcing it.
Angels are often the first to invest in start-ups, and this carries a lot of weight with future investors. It's a vote of confidence that helps attract venture capital.
Here are 9 essential elements to consider when attracting Angel Investors to your company:
Make sure your company fits the profile
Only about 5 % of companies get the angel investment they're looking for. That's how fierce the competition is.
Because early-stage financing is so risky, angel investors need to earn enough return on their successful investments to offset their less successful ones.
That's why they're usually looking for a five- or tenfold increase in their investment. Your company must have the growth potential to match their interest.
Prepare your company
It's rare for an investor to reconsider a project: get it right the first time!
Angels generally invest in companies that not only have great ideas, but also a great team, and are known for bringing their ideas to fruition.
Revenues are extremely important. Investors are looking for companies that are already at the marketing stage, not the concept stage.
Look for investors
There are various angel investor groups in Israel. Check out their websites to get a better idea of their criteria.
Ask other entrepreneurs in your sector how they met their investors. Your lawyer or accountant may also know wealthy individuals.
Gas pedals are another great way to meet angel investors.
Angel investors gravitate towards gas pedals. Participating companies have undergone a highly competitive selection process, which is a powerful argument for angels.
Start building relationships
Start building relationships with angels before you need money. They'll be more willing to discuss an investment when you're ready.
Angel investments are long-term marriages. Once you've identified an angel to whom you'd like to present your project, learn as much as you can about them. What are they investing in and why?
Know who you're doing business with. Your investor will want to know just as much about you. You'll be together for a long time.
Work on your "approach speech
Time really is money for wealthy investors. Prepare a short, compelling presentation about your company, focusing on the problem your product or service solves. Why will people buy it? What have you achieved so far?
Before you enter the room, it's important to have done your homework. You need to know your industry and your competitors - hopefully better than the investor does.
But don't assume you know everything. Be open to advice and criticism.
Overestimating the value of your company is one of the things that can derail a deal when you're talking to angels.
Base your assessment on the measurable success you've achieved so far. While they recognize the potential for growth, it's in the company's current value that angels invest.
Use proposals from other potential investors who can help you add value to your business.
Don't hesitate to consult our firm of chartered accountants for an estimate and valuation of your business.
Prepare yourself for due diligence
Investors will usually want to examine your financial statements, including any outstanding debt, as well as the company's ownership and legal structure.
Having all this information at hand can greatly speed up the process.
It's not just a question of money
Most angels are themselves entrepreneurs who have experienced the ups and downs of running a business. Their advice is invaluable.
Admittedly, these are wealthy people, hoping to get a significant return on their investment. But often, their main motivation is to give back. Most are there to support young entrepreneurs in realizing their vision.