What angel investors are looking for

Angel investors make up a significant portion of the money that is invested in businesses. Some studies even indicate that angel investors invest, about three times the investment rate, of institutional venture capital. Yet surprisingly angel investors typically reject approximately three quarters of investment proposals, sight unseen. This leaves small business owners who are looking for angel investors, asking the following questions-

• Where do you find angel investors?
• How do you get an angel investor to invest in your business?
• What are angel investors looking for?
• While the first two questions are important, perhaps the most important question is the last one. If small business owners can understand what angel investors are looking for, they stand a far better chance of positioning their company, to make it look like an attractive investment option. Here is what you need to know about what angel investors are looking for-
• Angel investors are looking for the potential for a solid return-This type of investors goes in with the expectation of doing more, than just getting their money back. Angel investors expect a good return on their investment, and that has to be a better return than they can do on the stock market. While the amount of expected return varies, from investor to investor, every angel investor will evaluate your small business, for this potential.
• Angel investors are looking for a good reason to invest-This stands to reason since most angel investors are, or have been, successful entrepreneurs. These are the type of people, who enjoy the thrill of helping to build, and create a thriving enterprise. While every angel investor is still an individual, you need to find the reason that will prompt them to invest, and then tailor your pitch to it.
• Angel investors are looking for a great management team-Small business owners must realize that a solid and complete management team with leadership ability, is crucial, if you hope to attract angel investors. Essentially an angel investor is investing in people, so he or she needs to see the evidence that your business is in the hands of people who are knowledgeable, competent, and trustworthy. And your potential angel investor will be looking to see if the management of your small business has the skills to lead your business to the next level. Keep in mind that for most businesses, a complete management team will include:skilled, knowledgeable, people who know about marketing and selling products, manufacturing, managing people, and accounting.
• Angel investors are looking for companies with a solid business plan-Small business owners must understand that angel investors will want to see a business plan that's both convincing and complete. They will be interested to see that you've developed a vision for your business, and that you've given thought to the details of how to get there. They will also want to see things such as financial projections, detailed marketing plans, and specifics about your market.
• Angel investors will be looking for the opportunity to be actively involved-You should keep in mind that for many angel investors, it's not just about the money; they want to actively participate in developing your business. They want to act as a mentor, and sometimes may even to take an active role in managing the company. Keep in mind that this often translates into the angel investor, having a seat on your board.
• Angel investors are looking for a business that is already structured for investment-Small business owners looking for angel investors should understand that while some angel investors invest by giving loans to a business, minority equity ownership position is the preferred choice for more than half of angel investors. The bottom line of this means that your business has to be structured to allow for investment (and that if you are the sole owner of your business, you have to be prepared to give up a certain amount of ownership if you want to attract angel investors).