An investor is anyone willing to give you capital for your business. They will usually offer this in exchange for an equity share in the company. (For more information about offering equity and company valuation, please see Deal & Valuation Guide).

The investors registered on Angel Investment Network are certified high net worth individuals, family funds and venture capital funds. These types of investors can also be found on crowdfunding platforms, but on many of these you will also find individuals looking to ‘donate’ small amounts in order to help a business that they would like to see realised.

The predominant interest of professional investors is obviously making investments in good companies that they hope will yield juicy returns.

But often angel investors will bring a lot more to the table and can help your company grow with more than just their capital.

Many investors will have previously built and exited companies and/or will have deep industry experience and business acumen. They may want to bring their experience to bear and give advice and contacts as well as funds.

Remember once they’ve invested, they will be as concerned as you are to see your company succeed!

How many investors do I need?

Short answer: As many as it takes to fill your round!

Longer answer:

Generally speaking it makes life easier all round if you have fewer investors as you will save time on paperwork, discussions, meetings etc.

However, as the startup industry has grown investors have become more educated about this type of investment. Previously, investors opted for large ticket sizes (i.e. the amount of money they put in), but now they are choosing to go for smaller tickets, but to invest more frequently.

This allows them to diversify their investment portfolios and in so doing mitigate their risk.

As a result, the size of your round will dictate how many investors you need to fill it.

A company raising a small £20k will probably only need one investor. A company raising £250k may need 10 investors to put in £25k.

This is in no way set in stone and some investors will be willing to put in large six figure investments if the company is good enough, the valuation is enticing and, of course, they have the money!

What sort of returns do investors want to make?

This will naturally depend on the investor. But the short answer is as much as possible!

Every investor dreams of investing in that so-called ‘unicorn’ startup, that once or twice in a lifetime company which increases its first valuation by a multiple of a thousand plus: Facebook and Uber, for example.

Of course, investors are realistic and are aware that not every company will reach the lofty heights of these ‘unicorn’ companies, but this doesn’t mean that companies that won’t are bad companies.

Far from it!

Any investor would be reasonably happy with an investment that increases by 15-20% over the course of a year. If you invested £100,000 and got £120,000 back 12 months later, you wouldn’t exactly be unhappy, would you?

Obviously the risky nature of startup investment means that investors are out to reap the rewards of taking risk and so will be hoping for big returns within a 3-5 year period (generally speaking).

And so, the nature of the system is, the more you can ‘prove’ to prospective investors that your company is likely to increase its initial valuation by significant amounts and short periods of time, the more likely they are to invest.

Obviously you can’t know for sure how things are going to turn out (but neither can they!); and if you have a compelling vision and the strategy and research in place to get there, you’re going to be very persuasive to investors.

How can I protect my idea?

To the uninitiated, uploading a cherished business idea to the internet sounds like a sure way to get your idea stolen.

The first thing to say is that, although you may think your idea is one in a billion, the chances are a number of other people will have had the same idea. The best way to stop other people doing your idea is to build it fastest and best so that there’s no chance of anyone capturing market share from you – be too good and too quick!

However, there are a number of ways that you can protect your idea:

First of all, when you decide upon an investment platform, whether crowdfunding, angel investment etc, make sure they offer security for your proposal. Your proposal should only be able to be viewed by registered members of the network. Good platforms will offer an extra privacy feature that will remove your proposal from appearing on Google – if you’re really worried.

Secondly, when you write your proposal, you do not have to reveal everything. You can write it in such a way as to entice investors. If they’re interested in finding out more, you can get them to sign an NDA before you send them your business plan. We’ve got stuff to help you do this…

What do investors look for?

This is a huge topic – books have been written about it; and then books have been written about those books.

Investors look for different things; and criteria for early stage investments are often more qualitative than objective. Moreover, there is no real formula for looking at early stage companies in the same way that there is for more established companies. Hence, some of the books have been very bad, but some have been excellent.

We evaluate hundreds of the best startups each week, so here’s a little insight into how we evaluate them in a nutshell. With this is mind, you should be able to write a proposal using our online template that will ‘hack’ investors by presenting them with exactly what they’re looking to see.

N.B. this cheat sheet is exactly what we give to investors when we’re teaching them how to evaluate proposals. We’re educating them with you in mind…

-    Idea – what’s your gut feeling?
-    Market – size of the opportunity?
-    Competition – is anyone else doing it better?
-    Team – is there enough competency and experience to make a success of the idea?
-    Traction – what have they achieved and in what time frame?

All of our Learn section is intended to give you a comprehensive understanding of what Angel Investors look for. So the points listed above will be dealt with in more detail in the sections that follow...