The best angel investing story, ever: In 1996, Larry Page and Sergey Brin were Ph.D. students at Stanford working on a research project that looked at the number and quality of sites that linked to a particular web page. Using mathematical algorithms, Page and Brin soon saw that the pages that had the most sites linking to it on a given subject were among the most relevant in a search engine query. Page and Brin then decided to use this information to create their own search engine they would eventually call Google.
In 1998, Page and Brin had met angel investor Andy Bechtolsheim, gave him a demonstration of Google, and Bechtolsheim decided to invest in their nascent company. He wrote out a check in the amount of $100,000 to “Google, Inc.” But according to Contact Magazine, “The investment created a small dilemma. There was no way to deposit the check since there was no legal entity [yet] known as ‘Google Inc.’ The check sat in Larry’s desk drawer for a couple of weeks while he and Sergey scrambled to set up a corporation.”
That $100,000 angel investment soon led to almost another million in investor funding. In 2004, Google went public and raised more than $1 billion. Today, Google has been calculated to be the world’s most valuable brand, with a value of around $100 billion.
Yes, angels are called angels for a reason – they answer business prayers. But if you want to find your own angel, then the first thing to understand is that the one thing they look for is a prayer that can make them a lot of money.
Here is what they look for:
- The opportunity: Why is this a unique opportunity and how will your business capitalize on it? Not every business needs to be the next big thing and not every business will need to raise $1 million in angel funding, but every business will need to show the investor that it offers something unique to the marketplace such that the likelihood of the investor making money is high.
- The competition: Who are your competitors, and why are you better?
- The financials: Your angel investor will want to see how you plan on spending the money, where and on what. What are your projected sales? Why?
- The team: Almost more than anything else, an investor can be wooed by a great team, one with experience, credentials, smarts, and contacts.
So where do you locate these angel investors of which I speak? The first place, and often the best, is through networking. Speak with your friends and family, with your accountant and lawyer, with real estate agents, bankers, and customers.
Beyond networking, maybe it is no surprise that the Internet has become a big player in the angel investment game. A host of online groups have cropped up in recent years to facilitate the introduction of entrepreneur and angel investor. A Google search will provide you with a list to choose from, but here are a few to help you get started:
Gust: Gust is a business planning and funding platform that allows entrepreneurs to search through over 25,000 investors.
AngelList: “How it works: You create a pitch and select investors . . . The investors review startups as they come in and ask for intros to the ones they like.”
No, getting an angel investment will not be as easy as it was for the founders of Google, but the benefits to you should nevertheless be equally significant if you get your business prayers answered.