The first step in getting an angel investor is to first find the potential individual that is going to be providing the necessary capital to your small business. This is usually the most difficult step in the capital raising process. The best ways to go about finding a private investor is to look on the internet, join your local chamber of commerce, engage a number of trade organizations, and work with business people that you already know. You can anticipate that this step will take about three month to one year depending on the number of contacts that you have, your industry experience, and your ability to negotiate with a potential funding source.
Once you have found your angel investor, it is time to star the negotiating process. This is usually the tensest aspect of the capital raising process as you do not want to give up too much equity in your business, but at the same time you do not want to lose a potential investor. As such, we strongly recommend that you work with a qualified attorney as well as a CPA that can effectively assist you during this process. They will be able to make sure that emotions are not brought into the capital raising process. Additionally, these advisers will let you know if any red flags appear during the due diligence process. The angel investor you have found is going to want to thoroughly examine a business plan, your business operations, and your personal background. On a side note, it is very important that you have all of the documentation in place prior to even finding an angel investor. This will save a tremendous amount of time when it comes to the due diligence aspect of the capital raising process.
The last step of obtaining angel investment is to finalize your agreement. In this step of the process, you are going to need to finalize the contracts with your attorney. Your angel investor’s attorney will also review appropriate documentation as it relates to a small business investment. This process is very similar to that of a real estate closing. Once all paperwork has been reviewed, it is time to make a disbursement of funds. Usually, a wire transfer will be made into your corporate bank account. A confirmation of receiving of funds will almost always have to be provided to an angel investor. From there, it is time to pop the champagne as you just secured capital from a private investor!
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