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There are tons of step-by-step guides to raising venture capital, but very few on how to raise from angel investors. What's the process for raising an angel round? What are angels looking for in companies? How do you find relevant angels? Let’s dive in.
Kirk from Merit shared detailed information about how he built his list of potential angel investors. Here’s a summary of his approach:
To find angel investors on LinkedIn or Twitter, search ‘angel investor’ in the search bar. Then, check the rest of their profile for evidence they’re a fit. Details in their bio or links on a personal blog can tell you if they’re likely to be interested in your company’s space (e.g., EdTech, DevTools, etc.). Their work history on LinkedIn can let you take a guess on whether they’re likely to meet the salary or net worth criteria to invest.
On Crunchbase, look for the angel investors of other companies in your space. These two videos shows how to find that on Crunchbase. You’re typically looking for angels who have recently invested in companies at similar stages and in the same industry as yours, but that aren’t directly competitive.
You can also Google ‘lists of angel investors in [your space].’ Your mileage on this may vary! Some software platforms also maintain angel networks or angel databases. Scroobious is one great example.
Reaching out to angels is similar to reaching out to VCs, and typically involves sending a forwardable blurb to a mutual connection. Here’s an example forwardable email from Roy Bahat's blog:
From: Alyssa Ravasio
Date: Thu, Jul 10, 2014 at 9:35 AM
Subject: Intro to Hunter Walk
To: Roy Bahat
Hi Roy,
I think Hunter Walk / Homebrew would be an amazing investor for Hipcamp. I love their emphasis on the bottom up economy. This resonates deeply with our mission and personal goals as well, since parks are engines of local economies.
Here’s a bit more about our company:
Hipcamp helps people discover and book campsites and cabins, a $3B market that has remained stagnant and fragmented since the 90’s. They are bringing the world’s public campgrounds online, unlocking access to private lands for camping, and ultimately, getting more people outside.
Dave Morin’s Slow Ventures is leading our seed round, we’re oversubscribed but can make room by reducing the allocation on Angel List. I’d love to connect with Hunter soon to explore if this is a good fit.
Thanks Roy!!
Alyssa
More resources on forwardable emails:
Wondering what literally happens when you get an angel on the phone or on Zoom? Ash Rust gives a clear overview here:
Pitch the Situation — The investor needs to understand why your business is special. If you meet at a quiet office with a big screen, take the opportunity to do your well-practiced pitch deck. If you’re at a coffee shop, pitch the key differentiators and try to move to something visual, like a demo or video, to offset the background noise. If it’s a walking meeting, emphasize the 1 or 2 key points, ideally with use cases, e.g. “A lot of our customers have an immediate need, our 1 minute setup usually wins the deal”.
Check out the rest of Ash’s post for info about rapport building, investor Q&A, and suggesting a next step.
Some founders raise rounds from angel investors without including a lead VC (who writes a large check, offers a term sheet, and sets the valuation). If you don't have a lead, how do you determine the valuation or valuation cap of your raise?
One method is a “rolling” or “tranche” fundraise, where the valuation changes as you get commitments. Here are my three favorite links with information on how to raise your valuation over time:
SAFE’s
Most founders raise their angel rounds on SAFEs, though some use convertible debt and some use priced rounds. (Nice explanation of these vehicles here, here, and here.)
Roll-Up Vehicles
Raising an angel round may result in lots of small checks. Later in your company’s lifecycle, you may want to take an action that requires permission from existing investors (e.g., an acquisition), and getting permission from 200 angels can be a pain. Roll-Up Vehicles (RUVs) are a way of combining all these checks into a single line on your cap table, managed by just one of your investors. More info on RUV’s in Kirk’s post. Check out AngelList’s RUV offering or talk to your lawyer about how to set up an RUV.
Want to dive in further? Here are my favorite step-by-step guides on how to raise from angels:
Kirk, the founder of Merit, breaks down how he raised funding from 100 angel investors! He includes personal examples and screenshots of how he built a list of angel investors (using tools like Crunchbase and LinkedIn), what materials he used, how many angels he contacted, how he qualified angels, his email outreach templates, and more. Kirk's round didn’t have a lead VC and is a great example of how to focus specifically on angels.
Ankit, OSlash’s CEO, shares his step-by-step guide for raising from angels. Ankit raised a $2.5M pre-seed round led by Accel, with participation from more than 50 angels. This guide focuses specifically on what you need for angel outreach and how raising from angels works in a venture round.
This is a YC founder’s blog post about how they raised their seed round. Their round got stalled out due to covid and was revived by targeting angels & building momentum with a weekly investor update. This is one of the most detailed and concrete blog posts I’ve seen, when it comes to metrics. Freshpaint’s founders highlight how many angels they talked to, where the intros came from (by check-size), what the conversion rates looked like from first chat to close, and the timeline of the whole thing. Though there were VCs involved in this round, it also works as a great deep-dive on how to structure your angel round. Super valuable for round planning.
Mark Suster (2x founder and VC at Upfront) shares a great overview on how to raise from angel investors outside the context of a VC round. Includes a high level overview of what you need to raise (deck, product, team, validation), a great break-down of common types of angel investors and advice on which to target, methods of finding angel investors, and how much to raise.
Note: This post was written in 2009 – high level advice holds true, but some of the details are dated. For example, valuation numbers, round names, and norms around priced rounds vs. convertible debt look different in 2023. (See these sources for up to date numbers [1] [2].)
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