The latest in George Deeb's "101 Startup Lessons" series zeroes in on the best ways to find angel investors for your startup -- and early-stage investing a hot topic this week, what with the official launches of the FireStarter Fund and the Invest Illinois venture fund.
George Deeb, of course, has been around the Chicago startup scene for a while now and offers some smart been-there, done-that advice for entrepreneurs on the hunt for seed-stage cash.
Here's a snippet:
How to find angel investors for your startup
By George Deeb
As we read in my previous post about fundraising options for your business, angel investors (not venture capital firms) are the most likely candidates to get your businesses from a piece of paper to a proof of concept. Today, we will tackle how you can find these angel investors across four distinct groups: friends and family; angel investors directly; networks aggregating money from angel investors, and fundraising advisers.
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As for finding angel investors directly, this by far is the hardest route. First, they prefer to stay anonymous. Second, they don't know you at all. Sometimes rich individuals have built formal family investment offices, with professional managers screening deals for them. But I have found that if they can afford a family office, they prefer to invest $5 million-plus in more typical venture investments, not $500,000 for a startup. Preferably, you need to find an individual who understands your industry and business model and can bring real value to the table and who understands your needs.
So, for example, if you think you have the next great video gaming technology, I would research what similar video game technologies have recently been sold (meaning the founder just got very cash rich), and reach out to that founder to tap into their expertise as an adviser, board member or investor. Notice I didn't lead with investor. You need to establish credibility with this individual before jumping into the investment question. And if he doesn't want to invest, he may know others in the industry who would, so ask him for references. Venture capital firms are also aware of key angels in their market, so reach out to them for guidance. There is a great website called Angel List that makes finding angels for your region or industry easier than ever, so check them out as a good place to start.
Read the entire post on Crain's blog for Chicago entrepreneurs.
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