Angel Investors: How to Find Them and What They Expect

Who Are Angel Investors?

Angel investors are high-net-worth individuals who invest their personal money in early-stage businesses in exchange for equity. They are typically accredited investors, meaning they have a net worth of at least $1 million (excluding their primary residence) or annual income above $200,000 ($300,000 for couples).

Angels fill the funding gap between what friends and family can provide and what venture capital firms will consider. Most angel investments range from $25,000 to $500,000, though some angel groups pool money for larger deals.

What Angels Look For

A Problem Worth Solving

Angels want to invest in businesses that solve real, painful problems for a defined market. The bigger the problem and the more clearly you can articulate it, the more interesting you are as an investment.

A Capable Founder

At the angel stage, the team matters more than almost anything else. Angels invest in people. They want founders who understand their market, have relevant experience or skills, and demonstrate grit, adaptability, and honesty. They want to know that when things go wrong, and they will, you will figure it out.

Market Opportunity

Angels need to believe that your business can grow big enough to generate a meaningful return. If you are building a lifestyle business that will generate $300,000 a year in profit, that is great for you, but it is not interesting to an investor who needs a 10x return on their capital.

Traction

The best pitch to an angel is not a slide deck. It is revenue. Customers. Growth. Even a small amount of traction, $5,000 in monthly recurring revenue, 100 paying customers, a signed contract with a major client, proves that your idea works in the real world.

A Clear Path to Return

Angels need to get their money back, plus a significant return, within 5 to 10 years. That means you need a plausible exit strategy: an acquisition, a later funding round, or in rare cases, an IPO. If there is no realistic exit, there is no deal.

Where to Find Angel Investors

Angel Groups and Networks

Most major cities have organized angel groups that review and invest in startups collectively. These groups meet regularly, hear pitches, and pool their investments. Examples include local angel groups affiliated with the Angel Capital Association.

Industry Events and Conferences

Attend conferences in your industry. Angels often invest in sectors they know well. A former restaurant chain executive might angel-invest in food tech. A retired software executive might back SaaS startups.

Your Extended Network

Many angel investments start with a warm introduction. Tell everyone you know, your accountant, your attorney, your former colleagues, that you are raising capital. Ask specifically: "Do you know anyone who invests in early-stage businesses?"

Online Platforms

Several platforms connect startups with angel investors. These platforms let you create a profile, share your pitch materials, and connect with accredited investors who are actively looking for deals.

SCORE and SBA Resources

SCORE mentors often have extensive networks of investors. An SBA Small Business Development Center (SBDC) can also connect you with local investors and help you prepare your pitch.

How to Structure an Angel Deal

Equity Round (Priced Round)

You set a valuation for your company and sell shares at that price. For example, if your company is valued at $2 million and an angel invests $200,000, they get 10% ownership. This is clean and straightforward, but setting a valuation at the early stage can be difficult.

Convertible Note

A convertible note is a loan that converts to equity at a future date, usually when you raise your next funding round. The note typically includes a discount (10% to 25%) and a valuation cap, which gives the angel a better price per share than later investors.

SAFE (Simple Agreement for Future Equity)

A SAFE is similar to a convertible note but is not a loan. There is no interest rate or maturity date. The investor gives you money now in exchange for the right to receive equity at a future priced round, subject to a valuation cap and/or discount.

What You Give Up

Equity

You are selling a piece of your company. Typical angel rounds give up 10% to 25% of the company. Be thoughtful about how much you sell early, because those percentages compound. If you give up 20% to angels and later give 25% to a VC, you have already given away 45% before the business has scaled.

Some Control

Most angel deals include investor rights: information rights (quarterly updates), pro-rata rights (the right to invest in future rounds), and sometimes board seats or advisory roles. These are normal, but understand what you are agreeing to.

Accountability

You now have someone else's money. That comes with a responsibility to communicate regularly, spend wisely, and pursue the growth plan you pitched. Good angels are patient and supportive, but they expect transparency.

Common Angel Investing Mistakes

• Not raising enough: If you need $300,000, do not raise $100,000 and hope for the best. Underfunding leads to desperation, which leads to bad decisions.
• Raising from the wrong people: An angel who does not understand your industry, who meddles in operations, or who expects immediate returns will make your life harder, not easier.
• Ignoring the legal work: Always use a lawyer who understands startup financing to draft your investment documents. A poorly structured deal can create massive problems down the road.
• Over-valuing your company: If you set your valuation too high, sophisticated angels will walk away. A fair valuation today creates a win-win for everyone.

Is Angel Investment Right for You?

Angel investment is right if you are building a high-growth business, you need capital to accelerate, and you are willing to share ownership and accountability. It is not right if you want to maintain full control, if your business does not have a clear path to a large exit, or if you simply need a loan to cover short-term expenses.