What Angel Investors Look for In Start-Ups

Angel investors play an important role in the growth and expansion of startups. According to the 2021 Scale-Up Institute Annual Review on the State of UK Scale-ups, it revealed that 60% of scale-up businesses in the UK have received Angel Investment as an integral part of their funding towards their growth journey.

It’s a mark of how crucial angel investors are, when the government’s revised definition of what constitutes an angel investor it sparked an uproar. Thankfully it sounds like the government is listening and is reviewing how they will address the angel investing rules. In the meantime, faced with a potentially reduced pool of angel investors for now, startup founders need to focus their efforts in order to stand out and attract angel investors.

In a recent article written for Real Business, Hatty shared some expert insights on what angel investors look for in startups and how founders can appeal to them. Drawing on her own experiences, Hatty outlined the common criteria that most angel investors use when evaluating early-stage businesses.

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What Angel Investors Look For

Angel investors seek more than just financial returns—they want to invest in businesses that have a compelling vision, a strong team, and the potential for scalability. Here’s a brief overview of the key factors that angel investors focus on:

A Compelling Vision and Mission: Founders need to demonstrate a clear, compelling mission beyond just profit-making. Investors are drawn to businesses solving real-world problems. They want to see that the product or service addresses a genuine need, saves customers time or money, or opens new opportunities for them.
A Strong and Coachable Team: Angel investors look for dedicated, capable teams with a mix of skills, experience, and passion. They also value coachability, and founders who are open to feedback and can pivot their strategy if necessary. Building strong relationships with your investors is important, and being adaptable helps reinforce trust.
Market Potential: A startup must demonstrate that there is a significant demand for its product or service. Investors look for businesses that not only address a market need but also have a path to capturing a sizable market share. Comprehensive market analysis, including an understanding of competitors and customer behavior, is key.
Scalability and Growth: Startups that can scale and grow rapidly are particularly attractive. Angel investors are more likely to back businesses with scalable business models or those using innovative technology to gain a competitive edge. Founders who have a clear plan for growth and profitability, as well as multiple revenue streams, stand out to investors.
Traction and Milestones: Traction is a critical factor for investors. This could include user growth, revenue, or strategic partnerships. The more evidence of market demand and product-market fit a startup can demonstrate, the lower the risk for investors. Milestones such as securing paying customers or launching a product give investors confidence in the business’s future success.

Building Investor Trust and Securing Funding

To attract angel investors, startups don’t need to have all the answers from the beginning. What’s important is showing investors that you’ve done the work to present a well-rounded and thought-out business plan. This preparation includes understanding the core needs of your market, having a vision for growth, and being able to showcase early traction.

Angel investors also value founders who can establish a relationship based on trust. Having a coachable attitude, being transparent about both the business’s successes and challenges, and demonstrating adaptability can help build the trust necessary for long-term investor partnerships.

By focusing on these core aspects, founders can make their business stand out and increase their chances of securing meaningful angel investment.

For a deeper dive into what angel investors are looking for and how you can position your business for success, read Hatty Fawcett’s full article on Real Business by clicking on the button below.

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FocusedforBusiness

CEO & Founder at Focused For Business

Hatty is the founder of our company, bringing a wealth of experience in funding and investment to the table. With a robust 15-year background in marketing and an MBA from Imperial College, she has successfully navigated the startup landscape, raising over £250,000 for her own venture and managing investments for former Dragon’s Den star Kelly Hoppen. Hatty’s dual perspective as both a founder and an investment manager enables her to demystify the investment process and empower entrepreneurs. Her dedication to levelling the playing field in equity investment earned her the title of Adviser of the Year 2022 by Enterprise Nation.

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