We live in rapidly changing times affecting all businesses, especially startups lacking the prime requirement for their business to prosper and the financial support to overcome the initial hurdle of debt.
There are several funding options which startups can adopt to finance their growing businesses one of which is angel investment. Angel investment is on the rise; becoming more common in the MENA region for helping entrepreneurs succeed in their business ventures.
Angel investors are usually affluent individuals with notable industry knowledge. They directly invest part of their personal assets in new businesses, which they believe to have high potential of flourishing, in exchange for ownership equity. An investment made by angel investors typically ranges from $25K-$3M per company.
The benefits of seeking angel investors to support startups goes back to what value they can put into the business. Angel investment goes beyond financial support, with investors often putting money into companies relevant to their industry, hence, making them great mentors in the early stages of a business startup. Angels bring years of expertise and guidance to the table, making startup enterprises better equipped in taking on difficult business decisions which limits the chance of falling for pitfalls or mistakes.
Although there are several angel investors out there, all looking forward to helping passionate entrepreneurs take their businesses to the next level, landing one is not that easy. Angel investors are usually willing to take the risk when they see potential for solid rates of return. They also consider various other factors surrounding the investment opportunity an entrepreneur presents, including having a good reason to invest, a proper business plan, a team with strong leadership qualities, and the chance to be actively involved in the project.
According to Forbes, only one out of ten startups are successful[1]. Nevertheless, successful companies like Apple, Uber, and Facebook were once financed by Angel Investors. Naturally, this means that regardless of the amount of money an angel has, they will reject investment proposals unless they are confident that their contribution is going to be worthwhile.
This brings us back to the main question, What do Angel Investors Look for in a Startup?
Angel investors care about the team. The experience and track record of founders as well as their commitment, passion, and integrity are all key factors in deciding whether or not this venture can succeed. It is critical for angel investors to sense that the founders are committed and motivated enough to do whatever it takes to make their business propel forward. Startup investors also appreciate founders’ willingness to listen and learn through investor mentorship, as they believe their time and expertise are just as valuable as their financial support.
Investors look for disruptive innovations which create exceptional new market opportunities, eventually displacing and modernizing the existing establishments. They need to know that the company they are investing in has the necessary qualities to develop into a robust organization with powerful and constructive influence on society.
Finally, the startup should have a sizeable valuation. A startup which is struggling now yet has future prospective of substantial growth would be of interest to scores of investors.
[1] https://www.forbes.com/sites/allbusiness/2015/02/05/20-things-all-entrepreneurs-should-know-about-angel-investors/#3954fa3ac1aa
