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What is angel investment?

Angel investment is a type of equity funding. Equity funding is where you receive capital in return for selling a share of your business. You’re not expected to pay it back (like debt), instead, you are committing to share the rewards of the business's success in the future i.e through dividends or the proceeds of a sale.

What is an angel investor?

An angel investor is an individual who invests their own money directly into early-stage companies in exchange for equity in the business. Angels tend to back startups in companies at very early stages (at a time when a bank would consider funding them too risky) and will often provide them with something more than just money: guidance, expertise, contacts etc. hence the term 'angel'.

Is angel investment right for me?

The main thing to consider is that raising angel investment means you are selling a portion of your business in return for capital. Are you prepared to do this?

Selling equity in your business will also set you on a different business trajectory. You will have other stakeholders with expectations on the business' success - is this a commitment you’re ready to take on? If not, perhaps debt funding is a better route for you. Of course, there are a few other options too: you could find some grant funding or raise through reward-based crowdfunding.

Is my business investable?

There are three things to think about when answering this question:

  1. Angel investment is predominantly used to fuel growth in innovative startups rather than cover working capital or cashflow for traditional businesses. Why are you raising funding?

  2. An angel’s aim is to get a return on their investment, so you should be aiming towards a liquidity event: selling the business or doing an IPO rather than building a business that you hang on to for your lifetime. What is your end goal?

  3. Do you have a compelling deal to offer an angel? From the actual business idea itself, to what you have validated and proven so far and the credibility of your team, all the way to the financial return potential. There are plenty of things an angel can invest in, why is your business a good deal?

This is a guide as to what angels typically look for but it certainly isn’t a rule. As angel investors are simply individuals with unique goals and interests, they could in theory invest in any kind of business, as long as the deal is compelling enough to them.

When is the right time to raise?

You can raise money from an angel at any point in your journey, even at the concept stage, you'll just need to find the right investor.

If you have decided that angel investment is the right funding route for you. You should get started as soon as possible because the process can take a long time (sometimes 6-12 months) and it won’t be easy. Start working out your timeline now.

Raise from Angels was created to help first-time founders raise their first round.

Check out our guides to help you get started.