A beginners guide to raising angel investment for your startup.
We have put together this guide to provide an overview of all the different aspects of raising angel investment and the questions you may have at each step of the way. Whether this is your first round or you’ve been through the process before, we hope this provides you with some clarity on your funding journey.
An angel investor is simply a High Net Worth individual who invests their own money directly in early-stage companies in exchange for equity in the business. Angels tend to back startups in companies at very early-stages (a risky investment!) before a bank would as well as sometimes providing them with guidance and expertise, hence the term 'angel'.
Often times angel investors are ex-entrepreneurs themselves who have been successful with their own business/businesses and are looking to stay connected in the world of business and utilise their gained knowledge by investing in others.
Is angel investment the right option for my startup?
As a startup founder, you will usually grow the business as much as you can without any funding, but eventually, you may hit a brick wall because you need finance to keep developing your solution, or because you need to grow faster to keep up with the market. Here, you are faced with two options: borrow money in the form of debt that you have to pay back with interest or sell a stake of your business. This decision will depend on your situation and preference as a founder.
It's worth considering that selling equity in your business sets you on a different trajectory. You will have other stakeholders with expectations on the business' success - is this a commitment you’re ready to take on? If not, perhaps debt funding is a better route for you. Of course, there are a few other options too: you could find some grant funding or raise through crowdfunding.
Is my business ‘investable’?
Raising equity investment means that your business shares are essentially being considered as stock. Now, imagine you are looking for things to invest in on the stock market, what are you looking for in companies? Most likely, for ones that will provide you with a healthy return in exchange for tying your money up for a period of time. Just like investing in stocks, when investing in early-stage companies there is always a risk you may not get a return or that you lose all of your money, so, in exchange for taking this risk, there needs to be the possibility for you to get a high return.
Have a look at your growth plan and cashflow forecast: does your business have the capacity to grow to at least 10x the size it is now? Will it happen in 5-10 years time? It’s important to note here that many businesses are limited to how much and how fast they can grow, and whilst that doesn’t mean it isn't a good or profitable business, it may not be an attractive option for an investor to put their money into.
Another thing to consider is how you will return the funds back to the investor? At some point, the investor will want to realise their gains and withdraw their investment, and so there needs to be an opportunity for them to do so at some point in the future. Do you have a plan to eventually sell the business or go public? If the answer is no and you are instead thinking of building a business that will create a great lifestyle for you which you own forever, then this may not create an opportunity for exit and therefore not fit investors criteria.
Are you happy to give away part ownership of the business? This may be an obvious one, but it’s really important to consider seriously. When you take in angel investment you are parting ways with a portion of your business and potentially changing the course of the business direction as you now need to think about not just what you want for the business, but also what is in the best interests of shareholders.
When is the right time to start raising funding?
Have a look at the startup stages presented below and try to pinpoint where you are on your startup journey. Whilst startups have raised angel investment at every single stage of this journey, the stage it makes the most sense to start pitching to angel investors is one. Whilst you may still be trying to figure out product-market fit, you would have tested your assumptions by this point and have a good foundation to start working out how to penetrate the market and build the final product. As the graphic shows, the earlier you’re asking someone to invest in your idea, the more they are betting on you as a person rather than your business.
How much can I raise from angel investors?
The amount raised from investors tends to be between £10k to £500k. However there is no set rule, there have been startups who have secured a 5k investment and some who secured £2M from an angel investor. It is common for a first raise to be £150k because this is the maximum amount you can raise under the government's Seed Enterprise Investment Scheme which gives your investor 50% tax relief.
What do investors look for?
From an investment perspective:
High return on investment potential: Does your investment opportunity have the potential to make big monetary returns?
Tax Benefits: Is your investment is eligible for SEIS or EIS tax relief?
A good fit for their portfolio: Does your business align with their investment thesis and doesn’t cause an imbalance for their existing portfolio of investments? i.e if they have already invested in a pet food company, they may not want to invest in another pet food company as it’s good practice to spread your risk amongst different sectors.
Something that aligns with their philosophy, experience, values or simply piques their interest.
From a business perspective:
Clarity: You can clearly explain your business
Credibility & edge: You have a strong team that gives you an edge over competitors
Passion: You care deeply about the problem you’re solving and you have an inspiring and unshakable vision
Focus: You can showcase possibilities of growth whilst staying focused on bringing one thing to market at a time
Proof: You have proven your hypothesis, and are seeing the beginnings of traction or product/market fit
Route to market: You have figured out options for a route to market and how much of the market you can potentially acquire
Business Model: You have figured out an initial business model that explains how your business will make money
A thought-out plan: You have a planned roadmap of activity, key hires, sales strategy, and you know how you will spend the investment money
What do I need to prepare before speaking to investors?
A pitch deck (a condensed version of the slide deck for presenting)
A business plan
A financial forecast for the next 3-5 years
Advance assurance for SEIS/EIS* tax-relief (if applicable to your business)
As your conversations with investors get more serious, it’s a good idea to create a ‘virtual data room’ i.e a secure Google drive or Dropbox folder with all of these documents in one place for easy sharing.
*These are government schemes that provide tax relief for investors, and therefore make your investment opportunity more attractive. You can find more information on the SEIS or EIS schemes via the gov.uk website.
How to find angel investors
There are many ways to find angel investors. Remember, angel investors are simply individuals who are interested in and have the resources to invest in early-stage companies. It is useful to articulate who your ideal investor would be, to help you narrow down your search.
Do your research: search on google, read the news on investments, review angel lists, use LinkedIn etc.
Tap into your network: tell everyone you know that you’re raising funding, you never know who you might know that knows someone, that knows someone…
Join an accelerator: startup programmes often have a built-in funding element and expose you to investors via demo days and networking events.
Join a coworking space: a coworking space can be an interesting place to network and meet other businesses that have had investment and may be willing to share their connections with you.
Go to networking events: put yourself in the shoes of an investor, where would they hang out? What kind of networking events would they attend? Go where the investors go and have your pitch ready to casually slip into conversation.
Ask your accountant: most accountants will have a variety of clients, some who may happen to be angel investors or people in your industry who can help.
Contact your bank: this may not be an obvious one but if you can get in touch with a relationship manager at your bank they may be able to put you in touch with someone.
Approach angel groups like SEA. Raising funding and finding multiple investors is time-consuming. An angel group has already done the work for you and can get you in front of investors fast. There are a lot of angel groups in the UK, you can search for your nearest angel group via the UK Business Angel Association.
How long does the investment journey take?
This depends on so many factors: how big your network is, how much prep work you have already done, how exciting your investment opportunity is, the current state of the market and your industry, and of course how good you at selling and pitching.
Some people raise funding within 1 month of pitching to investors, whilst for others, it can take years. It’s also worth noting that most businesses raise multiple rounds of funding, and the faster you’re growing the sooner you’ll be raising your next round - so essentially you may always be raising.
The key takeaway here is that it’s going take up a lot of your time. It’s almost a full-time job as CEO for you to ensure that you have the funding required for the continuous growth of your startup, so make sure you absolutely need funding and that you have the capacity to both run the business and raise finance.
Creating a successful fundraising plan
So, you’ve read through this guide and decided angel investment is right for you, you have your materials ready, and you know how to approach investors. How can you make sure you’re successful?
A great way to get started and something that will be essential to your success is to draw out a timeline of your objectives for raising funds with strict deadlines. You will likely end up flexing the timeline according to how things are going, but having deadlines will help you stay accountable, as well as give a clear cut deadline for investors to make a decision.
Next, think about what kind of investor you're trying to find, who would be the ideal individual to add to your board? This can help you significantly in narrowing down your search and provide you with a better opener than simply asking them for money.
When setting your targets, focus on processes over goals. There are so many variables in the world of fundraising, it will be difficult, and you probably will feel like you're getting nowhere more than once on your journey. A good way to combat this is to focus on what you can control. For example, instead of saying 'we will raise 150k in 3 months', you should say 'we will reach out to 100 investors in the next 3 months'.
Finally, (and this is an important one) make sure you stay open-minded, take on feedback, and keep learning as you go through the process. You will hear a lot of people say 'no' but if you take these as opportunities to improve your business, change how you pitch, or perhaps realise you're pitching to the wrong investors, then they all end up being steps towards a 'yes'.
Keep it classy and good luck on your fundraising journey!
2. Welcome to South East Angel’s privacy notice.
3. South East Angels respects your privacy and is committed to protecting your personal data. This privacy notice will inform you as to how we look after your personal data when you visit our website (regardless of where you visit it from) and tell you about your privacy rights and how the law protects you.
4. Important information and who we are
5. Purpose of this privacy notice
6. This privacy notice aims to give you information on how South East Angels collects and processes your personal data through your use of this website, including any data you may provide through this website when you sign up to our newsletters, enrol on one of our programmes or sign up to attend one of the events that we organise.
7. This website is not intended for children and we do not knowingly collect data relating to children.
8. It is important that you read this privacy notice together with any other privacy notice or fair processing notice we may provide on specific occasions when we are collecting or processing personal data about you so that you are fully aware of how and why we are using your data. This privacy notice supplements the other notices and is not intended to override them.
11. If you have any questions about this privacy notice, including any requests to exercise your legal rights please contact us using the details set out below.
12. Contact details
13. Our full details are:
14. Full name of legal entity: South East Angels
15. Email address: firstname.lastname@example.org
17. You have the right to make a complaint at any time to the Information Commissioner’s Office (ICO), the UK supervisory authority for data protection issues (www.ico.org.uk). We would, however, appreciate the chance to deal with your concerns before you approach the ICO so please contact us in the first instance.
18. Changes to the privacy notice and your duty to inform us of changes
19. The data protection law in the UK will change on 25 May 2018. Although this privacy notice sets out most of your rights under the new laws, we may not yet be able to respond to some of your requests (for example, a request for the transfer of your personal data) until May 2018 as we are still working towards getting our systems ready for some of these changes.
20. It is important that the personal data we hold about you is accurate and current. Please keep us informed if your personal data changes during your relationship with us.
21. Third-party links
22. This website may include links to third-party websites, plug-ins and applications. Clicking on those links or enabling those connections may allow third parties to collect or share data about you. We do not control these third-party websites and are not responsible for their privacy statements. When you leave our website, we encourage you to read the privacy notice of every website you visit.
23. The data we collect about you
24. Personal data, or personal information, means any information about an individual from which that person can be identified. It does not include data where the identity has been removed (anonymous data).
25. We may collect, use, store and transfer different kinds of personal data about you which we have grouped together follows:
Identity Data includes first name, maiden name, last name, username or similar identifier, marital status, title, date of birth and gender.
Contact Data includes email address and telephone numbers.
Technical Data includes internet protocol (IP) address, your login data, browser type and version, time zone setting and location, browser plug-in types and versions, operating system and platform and other technology on the devices you use to access this website.
Usage Data includes information about how you use our website and services.
Marketing and Communications Data includes your preferences in receiving marketing from us and our third parties and your communication preferences.
We also collect, use and share Aggregated Data such as statistical or demographic data for any purpose. Aggregated Data may be derived from your personal data but is not considered personal data in law as this data does not directly or indirectly reveal your identity. For example, we may aggregate your Usage Data to calculate the percentage of users accessing a specific website feature. However, if we combine or connect Aggregated Data with your personal data so that it can directly or indirectly identify you, we treat the combined data as personal data which will be used in accordance with this privacy notice.
We do not collect any Special Categories of Personal Data about you (this includes details about your race or ethnicity, religious or philosophical beliefs, sex life, sexual orientation, political opinions, trade union membership, information about your health and genetic and biometric data). Nor do we collect any information about criminal convictions and offences.
26. If you fail to provide personal data
Where we need to collect personal data by law, or under the terms of a contract we have with you and you fail to provide that data when requested, we may not be able to perform the contract we have or are trying to enter into with you (for example, to provide you with goods or services). In this case, we may have to cancel a product or service you have with us but we will notify you if this is the case at the time.
27. How is your personal data collected?
28. We use different methods to collect data from and about you including through:
Direct interactions. You may give us your Identity and Contact Data by filling in forms or by corresponding with us by post, phone, email or otherwise. This includes personal data you provide when you:
register to use our site
subscribe to our services, newsletters or publications;
download content such as reports;
enrol on a programme
sign up to attend an event that we are organising;
request marketing to be sent to you;
take part in any discussion forums that we host; or
give us some feedback.
Automated technologies or interactions. As you interact with our website, we may automatically collect Technical Data about your equipment, browsing actions and patterns. We collect this personal data by using cookies, server logs and other similar technologies.
Third parties or publicly available sources. We may receive personal data about you from various third parties, including those set out below:
(a) analytics providers such as Google;
(b) event booking platforms such as Eventbrite
(c) other third parties such as, for example, business partners, sub-contractors in technical, payment and delivery services, advertising networks, search information providers, credit reference agencies
29. How we use your personal data
30. We will only use your personal data when the law allows us to. Most commonly, we will use your personal data in the following circumstances:
Where we need to perform the contract we are about to enter into or have entered into with you.
Where it is necessary for our legitimate interests (or those of a third party) and your interests and fundamental rights do not override those interests.
Where we need to comply with a legal or regulatory obligation.
31. See below to find out more about the types of lawful basis that we will rely on to process your personal data.
32. Generally we do not rely on consent as a legal basis for processing your personal data other than in relation to sending third party direct marketing communications to you via email or text message. You have the right to withdraw consent to marketing at any time by contacting us.
33. Purposes for which we will use your personal data
34. We have set out below, in a table format, a description of all the ways we plan to use your personal data, and which of the legal bases we rely on to do so. We have also identified what our legitimate interests are where appropriate.
35. Note that we may process your personal data for more than one lawful ground depending on the specific purpose for which we are using your data. Please contact us if you need details about the specific legal ground we are relying on to process your personal data where more than one ground has been set out in the table below.
Purpose/Activity Type of data Lawful basis for processing including basis of legitimate interest
To register you as a new customer as part of your enrolment on a programme or your signing up to attend an event (a) Identity
(b) Contact Performance of a contract with you
To deliver information, reports, newsletters and programmes that you have signed up to receive (a) Identity
(c) Marketing and Communications (a) Performance of a contract with you
(b) Necessary for our legitimate interests
(c) Marketing and Communications (a) Performance of a contract with you
(b) Necessary to comply with a legal obligation
(c) Necessary for our legitimate interests (to keep our records updated and to study how customers use our services)
To administer and protect our business and this website (including troubleshooting, data analysis, testing, system maintenance, support, reporting and hosting of data) (a) Identity
(c) Technical (a) Necessary for our legitimate interests (for running our business, provision of administration and IT services, network security, to prevent fraud and in the context of a business reorganisation or group restructuring exercise)
(b) Necessary to comply with a legal obligation
To use data analytics to improve our website, programmes, services, marketing, customer relationships and experiences (a) Technical
(b) Usage Necessary for our legitimate interests (to define types of customers for our programmes, events and services, to keep our website updated and relevant, to develop our business and to inform our marketing strategy)
To make suggestions and recommendations to you about programmes, events or services that may be of interest to you (a) Identity
(d) Usage Necessary for our legitimate interests (to develop our services and grow our business)
37. We strive to provide you with choices regarding certain personal data uses, particularly around marketing and advertising. We have established the following personal data control mechanisms:
38. Promotional offers from us
39. We may use your Identity, Contact, Technical and Usage Data to form a view on what we think you may want or need, or what may be of interest to you. This is how we decide which products, services and offers may be relevant for you (we call this marketing).
40. You will receive marketing communications from us if you have requested information from us or purchased or received services from us (including enrolling on a programme or attending an event) and, in each case, you have not opted out of receiving that marketing.
41. Third-party marketing
We will get your express opt-in consent before we share your personal data with any company outside the South East Angels of companies for marketing purposes.
42. Opting out
43. You can ask us or third parties to stop sending you marketing messages at any time by following the opt-out links on any marketing message sent to you or by contacting us at any time.
44. Where you opt out of receiving these marketing messages, this will not apply to personal data provided to us as a result of enrolling onto a programme.
47. Change of purpose
48. We will only use your personal data for the purposes for which we collected it, unless we reasonably consider that we need to use it for another reason and that reason is compatible with the original purpose. If you wish to get an explanation as to how the processing for the new purpose is compatible with the original purpose, please contact us.
49. If we need to use your personal data for an unrelated purpose, we will notify you and we will explain the legal basis which allows us to do so.
50. Please note that we may process your personal data without your knowledge or consent, in compliance with the above rules, where this is required or permitted by law.
51. Disclosures of your personal data
52. We may have to share your personal data with the parties set out below for the purposes set out in the table in paragraph 4 above.
Companies in the South East Angels
Marketing platforms such as Salesforce
Event booking platforms such as Eventbrite
Third parties to whom we may choose to sell, transfer, or merge parts of our business or our assets. Alternatively, we may seek to acquire other businesses or merge with them. If a change happens to our business, then the new owners may use your personal data in the same way as set out in this privacy notice.
53. We require all third parties to respect the security of your personal data and to treat it in accordance with the law. We do not allow our third-party service providers to use your personal data for their own purposes and only permit them to process your personal data for specified purposes and in accordance with our instructions.
54. International transfers
55. We share your personal data within the South East Angels . This may involve transferring your data outside the European Economic Area (EEA).
56. Whenever we transfer your personal data out of the EEA, we ensure a similar degree of protection is afforded to it by ensuring at least one of the following safeguards is implemented:
We will only transfer your personal data to countries that have been deemed to provide an adequate level of protection for personal data by the European Commission. For further details, see European Commission: Adequacy of the protection of personal data in non-EU countries.
Where we use certain service providers, we may use specific contracts approved by the European Commission which give personal data the same protection it has in Europe. For further details, see European Commission: Model contracts for the transfer of personal data to third countries.
Where we use providers based in the US, we may transfer data to them if they are part of the Privacy Shield which requires them to provide similar protection to personal data shared between the Europe and the US. For further details, see European Commission: EU-US Privacy Shield.
57. Please contact us if you want further information on the specific mechanism used by us when transferring your personal data out of the EEA.
58. Data security
59. We have put in place appropriate security measures to prevent your personal data from being accidentally lost, used or accessed in an unauthorised way, altered or disclosed. In addition, we limit access to your personal data to those employees, agents, contractors and other third parties who have a business need to know. They will only process your personal data on our instructions and they are subject to a duty of confidentiality.
60. We have put in place procedures to deal with any suspected personal data breach and will notify you and any applicable regulator of a breach where we are legally required to do so.
61. Data retention
62. How long will you use my personal data for?
63. We will only retain your personal data for as long as necessary to fulfil the purposes we collected it for, including for the purposes of satisfying any legal, accounting, or reporting requirements.
64. To determine the appropriate retention period for personal data, we consider the amount, nature, and sensitivity of the personal data, the potential risk of harm from unauthorised use or disclosure of your personal data, the purposes for which we process your personal data and whether we can achieve those purposes through other means, and the applicable legal requirements.
65. In some circumstances you can ask us to delete your data: see the YOUR LEGAL RIGHTS section below for further information.
66. In some circumstances we may anonymise your personal data (so that it can no longer be associated with you) for research or statistical purposes in which case we may use this information indefinitely without further notice to you.
67. Your legal rights
68. Under certain circumstances, you have rights under data protection laws in relation to your personal data. Please read the section called YOUR LEGAL RIGHTS below to find out more about these rights
69. If you wish to exercise any of your legal rights, please contact us
70. No fee usually required
71. You will not have to pay a fee to access your personal data (or to exercise any of the other rights). However, we may charge a reasonable fee if your request is clearly unfounded, repetitive or excessive. Alternatively, we may refuse to comply with your request in these circumstances.
72. What we may need from you
73. We may need to request specific information from you to help us confirm your identity and ensure your right to access your personal data (or to exercise any of your other rights). This is a security measure to ensure that personal data is not disclosed to any person who has no right to receive it. We may also contact you to ask you for further information in relation to your request to speed up our response.
74. Time limit to respond
75. We try to respond to all legitimate requests within one month. Occasionally it may take us longer than a month if your request is particularly complex or you have made a number of requests. In this case, we will notify you and keep you updated.
77. LAWFUL BASIS
78. Legitimate Interest means the interest of our business in conducting and managing our business to enable us to give you the best service/product and the best and most secure experience. We make sure we consider and balance any potential impact on you (both positive and negative) and your rights before we process your personal data for our legitimate interests. We do not use your personal data for activities where our interests are overridden by the impact on you (unless we have your consent or are otherwise required or permitted to by law). You can obtain further information about how we assess our legitimate interests against any potential impact on you in respect of specific activities by contacting us
79. Performance of Contract means processing your data where it is necessary for the performance of a contract to which you are a party or to take steps at your request before entering into such a contract.
80. Comply with a legal or regulatory obligation means processing your personal data where it is necessary for compliance with a legal or regulatory obligation that we are subject to.
81. YOUR LEGAL RIGHTS
82. You have the right to:
Request access to your personal data (commonly known as a "data subject access request"). This enables you to receive a copy of the personal data we hold about you and to check that we are lawfully processing it.
Request correction of the personal data that we hold about you. This enables you to have any incomplete or inaccurate data we hold about you corrected, though we may need to verify the accuracy of the new data you provide to us.
Request erasure of your personal data. This enables you to ask us to delete or remove personal data where there is no good reason for us continuing to process it. You also have the right to ask us to delete or remove your personal data where you have successfully exercised your right to object to processing (see below), where we may have processed your information unlawfully or where we are required to erase your personal data to comply with local law. Note, however, that we may not always be able to comply with your request of erasure for specific legal reasons which will be notified to you, if applicable, at the time of your request.
Object to processing of your personal data where we are relying on a legitimate interest (or those of a third party) and there is something about your particular situation which makes you want to object to processing on this ground as you feel it impacts on your fundamental rights and freedoms. You also have the right to object where we are processing your personal data for direct marketing purposes. In some cases, we may demonstrate that we have compelling legitimate grounds to process your information which override your rights and freedoms.
Request restriction of processing of your personal data. This enables you to ask us to suspend the processing of your personal data in the following scenarios: (a) if you want us to establish the data's accuracy; (b) where our use of the data is unlawful but you do not want us to erase it; (c) where you need us to hold the data even if we no longer require it as you need it to establish, exercise or defend legal claims; or (d) you have objected to our use of your data but we need to verify whether we have overriding legitimate grounds to use it.
Request the transfer of your personal data to you or to a third party. We will provide to you, or a third party you have chosen, your personal data in a structured, commonly used, machine-readable format. Note that this right only applies to automated information which you initially provided consent for us to use or where we used the information to perform a contract with you.
Withdraw consent at any time where we are relying on consent to process your personal data. However, this will not affect the lawfulness of any processing carried out before you withdraw your consent. If you withdraw your consent, we may not be able to provide certain products or services to you. We will advise you if this is the case at the time you withdraw your consent.