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How should I approach an angel investor?
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First, have your pitch down cold. If you need any help with that there are a ton of resources on-line to help with that such as Pitching Hacks, etc..
Second, get an introduction – a warm lead is always better. Start with your own network. Ask your friends, family etc. if they know anyone who might be willing to invest and has the wherewithal.
If you have exhausted your networks and still need additional Angel capital, contact your local Angel group manager. Listings can be found on websites like www.angelinvestor.ca, www.angelcapitalassociation.org, or other national groups that help coordinate the angel community.
Angel groups are set up, partially, to attract deal flow and act as a public face for a consortium of investors; they want you to get in touch! That said, it is always better to have an Angel champion in the group who believes in and will be investing in your company, so again the introduction is key to success.
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What should I look for in a potential investor?
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Not ALL money is good money. As one of my colleagues says, some of his investments have lasted longer than some of his marriages. Because Angel investments are fairly illiquid you may be working with your investors for many years to come. Determining if there is an appropriate fit between your investor(s) and yourself is, I believe, the most important thing to look for in an investor.
The same goes for a group of investors: Make sure that investor that will be representing the investors and taking on a Board seat (yes, they will likely want representation on the Board) is someone you get along with.
Your investors are a part of your extended team and if your team does not work well together your chances of success just went down.
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