The Art of Raising Angel Capital
Guy Kawasaki explains that Raising Angel Capital "is not harder or easier than raising institutional venture capital — it's simply different." His advice:
- Make sure they are “accredited” investors. “Accredited” is legalese for “rich enough to never get back a penny.”
- Make sure they're sophisticated investors. Sophisticated angel investors have knowledge and expertise in your industry — they will have “been there and done that.”
- Don't underestimate them. You can have an “early stage” company but not a “dumb ass” company, and angels care as much about liquidity as venture capitalists — maybe even more since they're investing their personal, after-tax money.
- Understand their motivation. They've “made it,” so now they want to “pay back” society by helping the next generation of entrepreneurs. Thus, they are often willing to invest in less proven, more risky deals to provide entrepreneurs with the ability to get to the next stage. I know many nice venture capitalists, but I cannot tell you that any of them are motivated by the desire to pay back society. :-)
- Enable them to live vicariously. That is, angels want to relive the thrills of entrepreneurship while avoiding the firing line.
- Make your story comprehensible to a spouse. If you've got a “client-server open source OPML carrier class enterprise software” product, you must make it comprehensible to the angel's husband when he asks, “What are we going to invest $100,000 into?”
- Sign up people that they've heard of. Even if the other investors are not buddies, investing side by side with well-known angels is quite attractive. If you get one of these guys or gals, you're likely to attract a whole flock of angels too.
- Be nice. If you're seeking angel capital, you're probably not proven, so you can't get away with actling like a schmuck.
