Too often entrepreneurs that get turned down by an angel simply give up and feel like that person is no longer a value to them, but that person could still be a mentor to the entrepreneur and even provide referrals to other investors.
If instead of being an angel investor I was an entrepreneur looking for angel investment, this is what I would do to find an angel. I would talk to my lawyer and let him or her know that I need financing, and ask him or her who does he know that invests in startups. I would let my parents know. I would post it on my Facebook page. I would post it on my LinkedIn page. I would go to any kind of gathering in my community that involves entrepreneurship like lectures to entrepreneurs or seminars put on by local law firms or marketing pitches. I would go to any of those and simply interact with the crowd and put the word out that I’m looking for financing. In addition to all those methods, of course today, there are online platforms. Angels List is one of the most prominent, but there are going to be an increasing number of them as the Jobs Act allows these online portals to be a venue for companies to solicit investment. And I would definitely post my company on those as well. I would, in addition to that, look for an angel group in my area. I would go to the Angel Capital Association website and I would try to apply to those angel groups. Once I met a few angels, I would then ask them who they know that might invest in my company. Too often, entrepreneurs, if they get turned down by an angel, simply give up and feel like that person is no longer of value to them. But in addition to just being a mentor, that person can also provide referrals to their network, and pretty soon—like Metcalf’s Rule, the value of a network is the square of the number of nodes in the network—those references add up, and pretty soon you can be talking to scores of angel investors. And once one of them invests, they then become a champion for your business.
Finding an angel investor is just about putting the word out there that you’re looking for financing. But you want to qualify who it is you’re talking to. You want to make sure that they’re actually an angel investor who’s interested in investing in your company, and not someone else, say a service provider, looking to actually sell you services or a tire kicker who’s really just interested in finding out what you’re up to. Interview them as much as they’re interviewing you about your business, by finding out how much investment they’ve done and in which companies. One of the diligence items that you’ll be asked to do probably by anyone who’s interested in investing in your company is to provide a list of references, people that know you and know your business, or perhaps some of your customers. Similarly, you’re completely within your rights—in fact, you’re encouraged—to ask them for some references of companies that they’ve been involved with and find out what those entrepreneurs felt about the engagement with that investor.