How to raise a substantial round with angel investors

Getting VCs to invest in an early-stage startup post-pandemic is no walk in the park. Even more so if you’re running a B2C startup. And if you’re a female or diverse founder, be primed for an arduous endeavor because, in Europe, female entrepreneurs received a mere 0.9% of 2022’s investment capital.

What’s challenging to make sense of as a founder is that VCs thrive on risk but are cautious in downturns. So, with global events like the Ukraine war, market crashes, and inflation casting a shadow, they tend to stick to the familiar — typically, B2B male founders of established, late-stage businesses.

But raising capital before the year ends doesn’t have to be a far-fetched dream. There are plenty of angel investors out there who are often more confident than your average VC. They’ve been through the mill and built companies themselves, they’ve seen fluctuating markets and downturns before, and they know from experience that now is an optimal time to invest in early-stage ventures.

As a founder of a female-run, circular marketplace that digitizes the leading jewelers of the world — which just raised a $2.85 million seed round — here are my tips on raising a substantial round without VCs by focusing on angel investors only.

Tools and resources you absolutely need

Beyond capital, angel investors typically bring experience, networks, and moral support. But you won’t find them hiding in plain sight unless you have the right toolkit. Before you get started, make sure you have the following lined up:

• LinkedIn subscription: Yes, $79.99 per month is expensive. But with unlimited access to message anyone who looks like a potential investor on LinkedIn, the LinkedIn Sales Navigator Core package is a must for a successful angel fundraise.
• Crunchbase subscription: Totally necessary, too. It’s your first port of call to help you find investors in companies similar to yours.

• A good CRM: I simply used Notion and couldn’t live without it. When speaking with 500+ investors, you need some way of tracking conversations, angel quirks and preferences, and progress. I structured this in a kanban view, based on the stage of the conversation.
• A strong blurb: Stick to two or three sentences maximum, with links to published articles about your company, if you have them. The message should be straightforward, enabling potential investors to easily understand what the company does and what you’re looking to offer them — an investment opportunity.

• A taster pitch deck: You want to get people excited about the case by outlining the key selling points — typically the size of the opportunity, main product benefits, team, and existing backers — without giving everything away. The key objective here is to get you a call. Five pages maximum.
• Longer-form pitch deck: Here, you’ll want to go into more depth — there’s a ton of great content out there on pitch decks.
• A practical-oriented lawyer: From term sheets, convertible notes, and advance subscriptions to investment and shareholder agreements, there are quite a few documents you’ll need to be able to produce quickly when the fundraising accelerates. A lawyer with a practical mindset can help make that process a lot more comfortable and efficient — and they often make good stringers, too, but we’ll get to that.

For now, simply ensure that you have these resources. They’ll enable you to maximize your network and fill your pipeline.

Know your targets — it’s all a numbers game

If you think you know how many VCs you’d need to contact before you lock in your funds, for angels, multiply that figure by ten. I was in touch with approximately 500 investors across three to four months. Why? For starters, you’re working with lower ticket sizes, and those who will buy into the opportunity can be from all (or many) walks of life.

It typically takes around 50 interviews to raise funding with VCs, as they specialize in specific industries and their interests are more obvious. Founders can target their pitches to suitable VCs, saving time and effort. However, angel investors have a diverse range of interests and backgrounds. This means founders must reach out to and meet with many different angels to find the perfect match.

Despite the numerous emails, Zoom calls, and coffee meets required to raise money from angel investors, you gain back a wealth of experience and expertise. They are often passionate about helping startups succeed, giving founders invaluable support, on top of the capital.

Fill your pipeline before starting outreach

This is where the two-to-three-sentence blurb comes in. Email friends and former colleagues asking if they can think of others who might find your business case exciting, and if they’d be willing to forward on your pitch. This tactic can help you multiply your network in a matter of seconds. You need to make it as easy as possible for them to help you — including an inspiring, concise, and easily forwardable blurb is your biggest asset. 

As members of your friends and family networks start showing interest, you might be surprised by what trends you discover in terms of their fields and professions. For example, I’ve found investment from lawyers and doctors, not only “known” angel investors and entrepreneurs in the jewelry industry.

Remember, a lack of response doesn’t mean no. (Silence after three messages typically does, though.) You’re asking people for their time and money, so respect and charming persistence are essential.

Then, LinkedIn scouting helped me deduce who might be a high-net-worth individual (HNWI) from experience and title. Anyone with a C-level title in a growth company is typically a good bet. To gauge who’s actively investing, look for investors who are tagged in other founder or deal announcements — check out their posts, follows, and shares.

TechCrunch and Sifted round announcements can help here, too. Use these channels to educate yourself on warm leads and reach out to any new contenders you find along the way. If the lead is cold, try investors who have expressed passion for similar companies to yours. You can see investors’ and exited founders’ stakes on Crunchbase. For instance, I was looking at anyone with a remote interest in marketplaces, circularity, or some understanding of metals and ending the gold mining crisis.

Find stringers that connect you onward

You don’t need to go down the conventional route and use platforms like AngelList. Instead, think about those regularly in touch with investors — for example, lawyers, bankers, and family office managers. These people make good “stringers,” as they may be able to connect you onward to potential angels, and they’ll typically like being able to present good deal flow to their investor contacts. They might not be able to supply the funds themselves, but the nature of their business presents a pool of contenders with the means and the interest to invest.

Angel investors can also be stringers. Case in point: Two of our angel investors believed in our vision and brought in a handful more investors alongside them in a syndicate.

That’s where a good CRM like Notion comes in. You need an easy way to keep track of everything from meeting notes to which stringers introduced which investors.

Close swiftly with goals locked in

The good part about raising funds with a VC in the lead is that they provide their standard term sheet, you negotiate that, and then it’s presented to everyone joining the round as the locked-in terms. But with angels, you need to be ready to articulate the terms, before you have any clear lead in the round that you can point to.

You need to lead with a term sheet confidently; if not, you might relinquish a larger portion of your company than initially intended. Defining the investment amount, valuation, option pool, and other terms upfront and fearlessly is critical. This can shape your future investment rounds, who you bring onto your board, and even your exit opportunities.

Then, it’s all about keeping momentum. If you receive a yes from 10 investors in January but don’t close until June, you may lose half of them along the way. Get to a yes or no quickly. Avoid spending longer than three to four weeks conversing with your angels, and lock in the first close when you have about 25% to 30% of the full round committed. Don’t delay closing to wait for a commitment from any one investor. Even a big one.

Navigating the final stretch is the hardest part about raising a priced round from angels, and even after you’ve got a firm commitment, some angels might unexpectedly pull out. So, keep that funnel of new investors active and continue pitching until the finish line. Believe it or not, our last investor came on board just 24 hours before we sealed the deal. Which goes to show the importance of persistence in this game.

All in all, raising a substantial round with angels is very doable with the right strategies and tactics; you also gain the benefits of their network, expertise, and ideas readily accessible. And now, equipped with this toolkit, you have all the essentials to excel in your funding round with angel investors. Best of luck!