Entrepreneurs in Colorado often look for angel investors after the initial development of their new products or services. Angel investors can be individuals or groups of investors. A typical angel could be prepared to invest between $25,000 and $100,000 with the expectation that the investment will produce a return within three to five years. Angels and investor groups often focus on certain industries in which they possess expertise. Entrepreneurs should research appropriate investors to approach with proposals and prepare thoroughly for those meetings.
The founder of a startup company could search for angel groups within the immediate geographical area. When researching potential investors, the entrepreneur should check into the types of companies a group has funded previously. This information will provide insights about the preferred industries of certain angels and when they provide funds.
Some angels provide seed money early in a business’s development. Early stage investors might accept convertible notes, which may be appropriate when the valuation of a startup needs to wait for the next milestone. Convertible notes enable angels to ask for their money back, however. Other groups put their money on the table during A and B rounds and usually want equity for their investments.
When pitching, entrepreneurs need to communicate the fundamentals about their team, business plan and market research. The term sheet should clearly show the return on investment opportunities and provide valid reasons for investors to become enthusiastic about the startup.
An entrepreneur might gain important insights by consulting an attorney before and during the pursuit of seed capital. An attorney may review the business plan and inform the person about important issues like regulations and securities law. When angel investors make an offer, an attorney may advise the person about the rights and obligations of the deal.