Angel investors are a wide range of different investors, not as formally established as venture capitalist firms, and not as homogenous a group either. An angel investor might be a successful business person, a wealthy individual, a group of professionals such as doctors or dentists, or a local investment club, or somebody else completely different. Your angel might be a rich uncle.

Here’s the basics of finding angel investors:

  1. Finish your business plan.You need a plan for at least two obvious reasons:
    • to help you estimate how much money you need; and
    • to communicate with your investors
  2. Create your summaries. You need a compelling business plan summary to communicate with investors. Prepare a brief but exciting email, one page at most, outlining the growth prospects, type of business, and potential investor payoff. Prepare an investor summary memo or one page business pitch.
  3. Look for potential angels. Consider Harold Lacy’s “six degrees of separation” method. Your angel might be somebody you know, recommended by somebody you know, or a local investment club, business person, perhaps even a local development agency. Search your contacts. Lacy recommends that you ask everybody you know, not whether they want to invest, but whether they know anybody who might. You should also post on AngelList and Gust.
  4. Research your possibilities thoroughly. This is no time for mail-merge or mass-emailing software. As a potential investor emerges, find out whether he or she prefers a phone call first, a meeting, a complete business plan, a summary memo, email, or whatever. First, however, you need to establish some interest.
  5. Make sure you have a good relationship with an experienced attorney. You definitely need the right legal help to make a real deal. Make sure your attorney has been through similar deals; if not, then they should recommend a specialist instead. Investment deals are serious business.
  6. If you don’t find anything, what’s next?
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Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.