The best resource or reference for angel investors for entrepreneurs is the Angel Capital Association (http://angelcapitalassociation.org).  If you are looking for an angel investor to help fund your start-up business, this is a fantastic resource. 

The Angel Capital Association is a professional alliance of angel groups and provides information about many of the 265 angel organizations in the United States and Canada.  Some of you probably know about angel investors and how valuable they can be to a cash-strapped start-up company.  But for those of you who are not familiar with angels, read on.

What Is An Angel Investor?

The most significant roadblock to starting a business or maintaining one in its early stages is, without a doubt, money.  Without money, a great business may never get off the ground and have a chance to become profitable. 

But what if someone came along and offered to finance your start-up company?  And what if all he or she asked for in return was an equity stake in the business?  In other words, this person gives you money, and you give him or her a small piece of ownership (while retaining control of your company).

This is a win-win situation, and yes, it is very possible.  The investor I described is known as an angel investor.  Angel investors are for entrepreneurs what fuel is for a vehicle.  These types of investors tend to be affluent individuals who provide capital for a start-up business.  In exchange, they usually request convertible debt or ownership equity. 

Unlike venture capitalists, angel investors usually invest their own funds.  In addition, they are more flexible than a venture capital fund or firm, which normally will not and cannot consider investing less than $1 million or $2 million in a start-up company.

My Experience With Angel Investors 

Angel investors tend to be retired entrepreneurs or executives.  I met one in 2006, when I lived in Tallahassee, Florida.  One of my neighbors had a small software company.  He partnered with a real estate developer who provided him with the money (on a monthly basis) needed to keep the company afloat until it became profitable. 

In return, my neighbor gave this angel investor a 23% equity stake in the company.  My neighbor retained the controlling stake, made all the decisions, and met periodically with his investor to update him on the status of various projects and the progress of the business. 

Although angel investors typically seek high returns on their investments (given the risk involved in pouring money into a high-yield, but unrealized or undeveloped business idea or start-up), some of them are interested in investing for reasons beyond monetary return.  I remember this angel investor from Tallahassee very well.  At one point, my neighbor became very frustrated with his inability to succeed with his company.  It was not profitable yet, and money was hard to come by.  The investor took him out for a drink, and he stated to him clearly, “I want to see you succeed.”  He convinced him to keep striving for his dream and not to worry about money.  He also promised to continue providing the capital. 

It was inspiring, to say the least.  Sometimes, these investors simply want to mentor a new generation of entrepreneurs.  Other times, they want to stay in touch with current developments in a particular industry.  In addition, because these individuals are former entrepreneurs or executives, they can provide valuable management advice and important networking contacts. 

Tap Into Angel Investor Groups

So, let’s say you have a great business idea.  You may have even given it a go yourself with some of your own money.  However, you want to take that next step and fully immerse yourself in building a profitable company.  How do you find one of these angel investors?  According to the Center for Venture Research, there were approximately 234,000 angel investors in the United States in 2006. 

Not surprisingly, luck is often a factor.  My neighbor, for instance, met his angel investor at a bar.  They hung out at that bar regularly and became friends and, soon thereafter, business partners. 

But there is a far more efficient and comprehensive manner for locating an angel investor.  An increasing number of angel investors have organized themselves into angel networks or angel groups.  In these groups, they share research and pool their capital.  That way, they can make larger investments. 

The Angel Capital Association brings together many of the 265 angel organizations and groups in the U.S. and Canada.  Its directory section lists these groups by region, and the list contains links to each group’s website.  On those websites, you can find out what each group looks for, at what stage of a business it is willing to invest funds, the procedure for submitting a business plan or summary, etc. 

This database is invaluable, and I encourage every one of you with a business idea or a start-up company to review this list exhaustively.  It appears to contain all sorts of groups with different aims and goals.  Thus, regardless what kind of idea or business you have, in this list there should be a group for you.

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