Do’s and Don’ts for Wooing Angel Investors
By SIMONA COVEL
For a young business, it can be alluring: Find an “angel” investor to swoop in and help fund your growing company. With millions of small businesses and only a few hundred organized angel groups, where do you begin?
WSJ.com spoke with Knox Massey, a longtime angel investor, about getting started. Mr. Massey, a former senior salesman at AOL, is executive director of Atlanta Technology Angels, a private angel group that invests up to $4 million each year in young technology-focused companies.
Here is Mr. Massey’s advice on what a small-business owner should and shouldn’t do when searching for angel funding.
Research the investors. If your company is a manufacturer, don’t approach a technology-focused angel group. Make sure the people you’re talking to understand your business. Looking for an angel investor should be as intensive as searching for a new job, Mr. Massey says.
The best-prepared business owners, he says, know what types of companies his group has helped fund in the past. “I’m always astounded at the companies that use the shotgun approach,” says Mr. Massey. “They say, ‘You guys have money, let’s talk.’ “
The best-prepared business owners, he says, know what types of companies his group has helped fund in the past. “I’m always astounded at the companies that use the shotgun approach,” says Mr. Massey. “They say, ‘You guys have money, let’s talk.’ ”
Don’t expect to get funding right away. Seek out investors early as possible. It could take several months to meet with different individuals or groups and answer all of their questions. “We’re not going to drop everything we’re doing and immediately address what that [one] company needs,” says Mr. Massey.
Network. Check out associations for your industry or local trade groups. By talking with their members and officials, you may find people who can point you in the direction of investors in your industry. Call economic-development groups — their officials might be able to direct you to potential investor organizations. Some states have incubator organizations for young businesses, like Georgia’s Advanced Technology Development Center, which has several locations throughout the state.
Treat your initial interactions as the first step in a long-term relationship. “It’s a partnership — almost like a marriage,” says Mr. Massey. If you’re thinking about taking money from an angel group, remember that you’re going to be talking to the investors on a regular basis for years, so make sure you’re comfortable with them.
Don’t forget about your long-term plan. “You’re focusing on the fact that ‘I need that half-million dollars.’ But that’s not the most important thing,” Mr. Massey says. Think about what you’re going to do after you have the money, and focus on executing that multiyear plan.
Look at your investors as potential mentors. Many angel investors are former business owners who want to help people like themselves. “We look for an entrepreneur’s ability to listen,” Mr. Massey says. “You can really tell that early — if they have a tough time listening, or let [advice] fly over their head.”