Trying to launch a business without a startup plan is like taking a trip along a curvy, mountain road without a map, driving at high speeds, while wearing a blindfold. Here are some key items you should know about Angel Funding , Business Plan and lot more....

1. ABC of Angel Funding

2.  What are Angel Investors?
• an angel investor is NOT an
investor with golden wings and a
halo but rather an individual who
provides startup capital to a new
business and expects a percentage of
ownership equity in return.
• a financier who provides equity
capital for startup companies and
growing firms.

3.  How Angel Investors differ from
Venture Capitalists?
• venture capitalists, on the other hand,
are quite different from angel investors.
Rather than using their own funds, VC's
invest pooled money from other people.
• in addition to the percentage of equity
interest in a company, venture capitalists
usually desire an active say in the
invested company's business decisions.
• venture capitalists also have the
tendency to invest in expanding
companies, although many VC firms
have begun to invest in early stage
businesses as well.

4.  The benefit of obtaining Angel Capital?
• many lending institutions are very hesitant
about early stage ventures; therefore, it can
be very difficult to obtain the necessary
startup capital for a new business. If a
prospective entrepreneur is unsuccessful in
borrowing money from a bank, s/he may
often resort to an angel investor to raise
capital.
• the average angel investor can invest
anywhere between $150,000 and $1.5 million
in a given venture.

5.  The Angel investors' return on
investment?
• due to the risks associated with investing
in a new company, an angel investor will
often expect a very high return on
investment (ROI).
• since it is a proven fact that many new
companies will fail, an angel investor will
expect a return up to ten times his/her
investment within several years. Angel
investors believe that this amount will
balance the large risk of losing their
invested money.

6.  The entrepreneur and angel
investor relationship?
• it is vital for a company and their
angel investor(s) to form a sound
relationship with one another before
any investment takes place in order
to make sure they share the same
goals and ideals.
• a company and their angel
investor(s) must feel comfortable
with one another in order to maintain
good lines of communication and to
ensure a successful business.

7.  Different types of Angel Investors?
• corporate angels
• entrepreneurial angels
• enthusiast angels
• professional angels
• head angels (aka “lead dogs”)
• mentor angels (aka “guardian angels”)
• generational angels (aka “silver spoons with
silver wings”)
• intentional angels (aka “dark angels”)
• typical angels (aka “arch angels”)
• inexperienced angels (aka “cherubs”)
• venture capitalists who are also angel investors
(“moonlight as angels”)
• non-company building angels (aka “technology
angels”)

8.  Critical aspects of an Angel Investor?
1. An angel investor’s value to the
startup
• most angel investors take an active role in
their invested company; therefore,
entrepreneurs should expect to
enthusiastically engage with them on a
regular basis.
• an experienced angel investor will regularly
mentor and consult new entrepreneurs on
how to move the company forward and will
often request a board seat to make sure
their invested company is on the right track
to success.

9.  Critical aspects of an Angel Investor?
2. Background and Perspectives
• since every angel investor’s business
perspective is highly influenced according to
his/her personal experiences, they may
perceive things differently from other angel
investors.
• in addition, they may have more
knowledge than others depending on their
industry of expertise. Regardless of the
situation, it is important for entrepreneurs to
fully understand their angel investor’s
background, industry experience,
personality, and ROI before signing the term
sheet.
• at times, angel investors can either make
or break a company

10.  Critical aspects of an Angel Investor?
3. Differences in expectations
• entrepreneurs have certain expectations on how
their startups should be managed and operated.
• however, many angel investors may view an
entrepreneur’s standards as “naive” and disagree with
how the new business owner should take the
company forward.
• these differences of expectations between both
parties will often lead to poor communication,
avoidance, and resentment.
• both the angel investor and entrepreneur must
understand the expectations of one another in order
to amicably run the new company.

11.  Critical aspects of an Angel Investor?
4. Risk of Investment and Patience
• each investment they are involved in is considered “high risk”
since they do not have many investments that can protect
them if one of their startups fails.
• angel investors can also react differently under pressure,
which can be very influential in a company’s success.
• for example, if an angel investor fails in one investment, they
may accept their failure and move on. Others may lose their
patience, react illogically, and may choose to meticulously
micromanage the affairs of the failed startup.
• as a result of the latter situation, the entrepreneurs may be
advised to make the wrong strategic moves.
• due to the fact that every angel investor’s personality and
reaction is different, entrepreneurs should therefore
understand how risk averse the angel investors are before
obtaining startup capital from them.

12.  Critical aspects of an Angel Investor?
5. Professional Management of the Company
• unlike the conservative method of investing that banks
and venture capitalists have, angel investors tend to
communicate with entrepreneurs on a more informal and
personal level.
• at times, this relaxed approach can lead to
miscommunication and misunderstandings between the
angel investor and entrepreneur.
• some angel investors may have the tendency to
micromanage their invested company’s affairs and
undermine the entrepreneur’s efforts in operating the
company, which can be very damaging in the long run.
• to avoid such differences in opinions and possible
falling out, it is important that the entrepreneurs
understand the managerial background of their angel
investors from their previous investments before signing
the term sheet.

13.  Critical aspects of an Angel Investor?
6. Ethics
• ethics are very important in any business
endeavor. The angel investor should have
ethical behavior in all of their business
pursuits since the process of raising capital is
similar to having a business partner.
• entrepreneurs should scrutinize the angel
investor thoroughly, especially when it
comes to the ethics of how they conduct
business practices before any investment
agreement is made.

14.  Angel investors and Equity Financing
• often times, when a prospective entrepreneur
exhausts all of their immediate funding sources
(personal savings, borrowed money from friends
and family, and bank loans), they turn to angel
investors to raise capital.
• angel investors will provide the amount of
needed funding to the entrepreneur in return for
equity capital.
• this means that the new business will be funded
in exchange for ownership interest in a company.
• this interest usually comes in the form of stocks
or some other form of ownership that converts to
stock.
• unlike traditional debt financing that requires
immediate payment over time, equity financing
does not involve repayment of the borrowed
money since angel investors desire equity
ownership stake.

15.  Angel investors and their exit
strategy
• before investing in a business,
an angel investor will expect an
exit plan, the agreeable
strategy by which they will
cease their ownership in a
company.
• this can come in the form of
an acquisition, initial public
offering, earn-out, merger, or
debt-equity swap.
• angel investors who hold
equity ownership in a company
will often prefer to sell their
shares in an IPO (or initial
public offering), while others
may prefer the sale or merger
of the company.

16.  Angel investors and Experience
• when angel investors invest in a company, they
usually request a seat on the Board of Directors
and/or take an active management role in
running the company.
• this can be perceived as both good and bad. It
is good in the sense that often times experienced
angel investors will provide valuable insight to the
entrepreneur, mentoring them throughout the
venture in order to ensure the invested
company’s success.
• however, there is a downside to giving up a
certain percentage of ownership to an angel
investor.
• the more ownership that the entrepreneur gives
up, the more overall control they lose.

17.  Angel investor capital requirements
• in order for an entrepreneur to obtain
startup capital from an angel investor, they
will need to devise a well-written business
plan, present accurate cash flow projections,
the financial history, and personal and
business credit profiles.
• some angel investors may request the latest
tax return information and bank statements
from the past three years.
• it is necessary to present a well-detailed
business plan and have confidence in the plan
so that you can convince the lender that you
are a low-risk investment when obtaining
startup capital.
• if the entrepreneur appears confident and
has good business sense, then they will most
likely have no problem in finding their desired
startup capital for their business.

18.  Questions That Angel Investors Will Ask
An Entrepreneur?
1. Tell us about yourself and your
company?
• the entrepreneur should give a brief
introduction about him/herself, including
credentials and education, and other
pertinent background information in their
opening.
• a general idea of the company should then
be mentioned, followed by the company
objectives, as well as the different products
and services offered.

19.  Questions That Angel Investors
Will Ask An Entrepreneur?
2. Who are your major
competitors, and what makes
your products and services
unique?
• entrepreneurs should be
prepared to mention any market
opposition and how their
products and services will give
the business the competitive
edge.
• since market competition can
be relentless, it is always a good
idea to provide solid examples.

20.  Questions That Angel Investors Will Ask An
Entrepreneur?
3. Who are your targeted customers, and how
have they responded to your prototype?
• angel investors are always curious of
demographical information, including the targeted
market and consumer base the new business will
appeal to.
• by creating a prototype of the business idea(s)
and welcoming consumer response, the
entrepreneur can further refine his/her prototype
according to customer feedback.
• it may take multiple revisions before an actual
product is mass produced; therefore, it will be
wise for the entrepreneur to recruit potential
customers to support his/her sales and even use
them as references to encourage their deal with
angel investors.

21.  Questions That Angel Investors Will Ask An
Entrepreneur?
4. What is your marketing strategy for your
products and services?
• this includes an entrepreneur’s approach in
promoting the business through advertisements,
internet marketing and promotions, and public
relations to increase sales and achieve a
competitive advantage.
• marketing can be quite costly, so it is extremely
important for the entrepreneur to include this
estimated price in the financial plan.

22.  Questions That Angel Investors Will
Ask An Entrepreneur?
5. How much angel capital are you
seeking, and how will this
investment amount be distributed?
• it is always a good idea for
entrepreneurs to provide an estimate of
the amount of angel capital they are
seeking for their startup.
• by presenting the angel investor group
with financial outlines and predictions,
the entrepreneur will gain credibility in
conducting their own due diligence
(financial research) for their company.
• more impressive is the rough draft or
summary of how the angel investor
capital will be dispersed (i.e. rent,
utilities, technologies, salaries, etc.)

23.  Questions That Angel Investors Will Ask An
Entrepreneur?
6. What time frame do you expect the invested
money to last?
• this basically refers to the hypothetical period of
time it may take for the anticipated cash flow to
appear.
• this is also the calculated schedule of time that
is considered to be the “safe period” before
additional capital may be needed.
• typically, it will take an average of one year or
more for any new business to see revenue;
therefore, it is important for the entrepreneur to
consider all possible expenses before determining
this amount.

24.  Questions That Angel Investors Will Ask An
Entrepreneur?
7. What is my stake in the company and my
ROI?
• since every prospective angel investor wants to
have an idea of their percentage stake in a
company, as well as their rate of return, it is
crucial that this figure be presented and
negotiated.
• often times, angel investors expect a certain
percentage of ownership in a company with a
large return on investment because of the risk
associated with the fate of new businesses.
• the entrepreneur should be aware of such
demands and be prepared to present such values.

25.  Questions That Angel Investors Will Ask An
Entrepreneur?
8. What will happen next if the company fails?
• angel investors are known for their risky business
deals and often have a well-planned exit strategy for
each of their investments.
• there is always the possibility their invested
company may not be as successful as anticipated;
therefore, they usually prepare a strategic plan in their
agreement.
• they may choose to exit the company after a certain
period of time through IPO, merger, acquisition, or
sell-out.
• the entrepreneur can even offer their angel investor
some protection by providing a secured position on
assets and subordinating the equity in case future
liquidation occurs.

26.  Essential Components That Appeal To Angel
Investors?
1. Geography
• most angels prefer to invest locally for a variety of
reasons.
• first, the convenience of proximity will allow them to
frequently visit the companies they have invested in,
so they can regularly convene with the management
team and be present to witness their investment
progress.
• second, being closer to their investment enables
them to “source” deals through referrals whom they
know and trust.
• in order to accomplish this, they rely greatly on
other locally situated angels, accountants, attorneys,
business associates, etc.

27.  Essential Components That Appeal To Angel
Investors?
2. Size of the investment
• angels are interested in building small start-up
companies into moderately-sized businesses or large
valuable corporations with a high ROI.
• these types of start-ups may require capital of tens
of thousands of dollars minimum to launch, with
subsequent rounds of investments throughout the
company’s development.
• angels tend to invest anywhere from $25,000 to
$500,000 or more.
• for example, a $500,000 total investment a start-up
requires could be made by one angel investor, 5 angel
investors who contribute $100,000 each, or 20 angel
investors who contribute $25,000 each to the business
endeavor.

28.  Essential Components That Appeal To Angel Investors?
3. Management team
• the management team appointed by the company’s founders
must be solid, balanced, and experienced. Some businesses
have management teams located in different cities and come
together solely through telecommunications or
videoconferencing.
• this kind of “scheduled” organization puts the whole team at a
disadvantage because they are not physically working together
or know how to properly collaborate in the business.
• on the other hand, if all the individuals of a management
team are situated in one location, the individuals have the
opportunity to work with each other and learn from each
others’ strengths and weaknesses.
• even if a team has never worked with each other in the past,
when they come together during the start of a company, they
should demonstrate the “ability to execute,” that is, work
together in harmony with a proven track record and show their
company is establishing revenue and a quick ROI.

29.  Essential Components That Appeal To Angel Investors?
4. Market/industry influence
• angel investors usually invest in industries they have
experience in.
• in addition, they always evaluate the market’s needs for
different products or services.
• the industry of the young company’s goods and inventions
should already demonstrate vast growth potential before an
angel investor will consider providing the necessary funds.
• a growing market is the key to profitability and is indicative of
an angel investor’s strategy.
• early-stage companies should always provide goods and
services that reflect uniqueness, a competitive edge, and
consumer needs in a growing market.

30.  Essential Components That Appeal To Angel Investors?
5. Improving technology
• technology products and services have always demonstrated
popularity among consumers.
• since many technologies exist, the entrepreneur should
convince the angel investor that their particular technologies
are not only one-of-a-kind, but that they address any flaws that
their competitor’s products may have and as a result consumers
will purchase their products and services.
• many technical people employed by large corporations are
able to witness numerous market niches their companies have
ignored.
• these people then move on, leaving the company, and
develop a technology that addresses the previous problems
encountered.
• angels like to invest in companies like this because there is
already a proven consumer base and an identifiable customer
need that gave rise to the entrepreneur’s novel approach.

31.  Essential Components That Appeal To Angel Investors?
 Essential Components That Appeal To Angel Investors?
1. Improving technology
6. Potential rate of return
• technology products and services have always demonstrated
• when compared to venture capitalists, monetary gain tends to
popularity among consumers.
be a secondary motive for most angel investors. While many
• since many technologies exist, the entrepreneur should
angels invest for reasons that are not purely financial, their
convince the angel investor that their particular technologies
overall goal is still profitability.
are not only one-of-a-kind, but that they address any flaws that
• they recognize that start-up companies are high-risk
their competitor’s products may have and as a result consumers
investments and will want to justify that risk by seeking
will purchase their products and services.
commensurate (very high) rate of returns.
• many technical people employed by large corporations are
• for example, some angels require a 25% rate of return each
able to witness numerous market niches their companies have
year, while others may desire much more, such as ten times
ignored.
their investment in a specific time frame. This given period of
• these people then move on, leaving the company, and
time may span from a couple of years to several years.
develop a technology that addresses the previous problems
• many of these angel investors do not expect a rate of return
encountered.
for at least 5-7 years. Their average return on investments
• angels like to invest in companies like this because there is
expected is about 34%. their company meets the potential
already a proven consumer base and an identifiable customer
investors’ preferences.
need that gave rise to the entrepreneur’s novel approach.

32.  Essential Components That Appeal To
Angel Investors?
7. Exit strategies
• this is a company’s approach for
providing investors with a liquidity event,
an occasion or time during the
company’s development at which the
investor can obtain their rate of return.
• the exit strategy is often included in
the entrepreneur’s presentation, which
should provide the best estimate of time
for exit and liquidity for all potential
investors.
• acquisition of a company or a company
merger is the most probable exit
strategy made unless the company
revenues and market sector strongly
suggests an IPO opportunity.