How Startups Can Effectively Raise Capital from Angel Groups

One type of investor in startups is the angel group. These are angel investors who invest their own money, often in early-stage startups. These groups might operate through syndicated deals, in which an SPV is formed by the group leader to pool all investments together. In other groups, the angels in the group invest individually, but share resources to source deals and conduct their due diligence. 

We spoke with David Levine, an exited founder and angel investor. David is the founding director of the Manchester Angels group and the CEO of Glenluna Ventures. Here are some of his best suggestions for startups on how to successfully raise capital from angel groups: 

1. Identify the Right Angel Group:

Target angel groups that align with your startup's industry and stage. Different groups have varying focuses, such as specific sectors or investment sizes, and understanding these nuances will guide you to the most suitable group for your venture.

2. Understand the Expectations and Process:

Angel groups typically have a structured process for evaluating potential investments. Be prepared to present a thorough business plan, market analysis, and financial projections. Tailoring your pitch to meet their specific investment criteria can significantly boost your chances of success.

3. Forge Strong Personal Connections:

With many angel groups, the key to success is convincing one of the angels in the group to invest and take a leadership position in regard to the investment with the other members in the group. To increase your chances, prioritize finding members who have experience and knowledge in your market or industry. 

4. Understand the Mindset of Founder-Friendly Angels:

Founder-friendly angels, often being experienced entrepreneurs themselves, may be more willing to invest quickly. However, their own entrepreneurial experiences can also lead to a more skeptical and discerning approach. Be prepared to address their concerns thoroughly. Be sure to have all your materials and documents ready, as you might be headed for an extensive due diligence process. 

5. Avoid Generic Pitching Events:

Focus on finding angel investors and angel groups who show a genuine interest in your business and can offer more than just funding. Avoid broad, generic pitching events, and instead, seek out opportunities to connect with angels who can provide strategic value to your startup. Beware of angel groups that are more interested in socializing amongst the group than in actively investing. Never agree to pay to pitch. 

6. Conduct Your Due Diligence on the Angel Group:

Thoroughly research the track records of both individual angels and their groups. Ensure they have a history of successful investments and a genuine commitment to supporting startups. This due diligence is crucial in selecting the right partners for your venture.

Conclusion

Often overlooked, angel groups offer a unique and valuable source of capital for emerging companies. For startups looking to leverage this avenue, understanding how to engage with these groups effectively is key to unlocking essential funding and support.