Angel investors seek women-owned business startups: How to find a match

Finding the funding needed to start and grow an early-stage business is, a common issue for women entrepreneurs. Such funding typically comes from a number of sources: The founders’ savings, friends and family, bank loans and credit cards.

But there is another excellent source beyond the traditional options, and it is one that is not only often overlooked but is one that can often be the most valuable: the “angel investor.”

An angel investor is a high net-worth individual with available investment capital who, in exchange for an ownership stake in the business, is willing to take a risk with their money to help fund promising startups. How much an angel is willing to invest can vary significantly based on factors such as a company’s valuation. However, according to the Small Business Administration, the average angel investment is about $330,000 and the angel expects to make a profit of 20% from the investment.

And while funding is needed and welcome in the early stages of a business, what makes angel investors for female entrepreneurs even more attractive is that they typically provide help beyond the investment, such as mentoring, networking, experience, contacts, additional funding resources, strategy and more.

How does a woman-owned business attract angel investors?

Angel investors may look to a variety of factors when deciding whether to invest in a woman-owned business. They include:

• A solid entrepreneur and management team: Who is on the team, what is their experience, and what do they bring to the table?
• A marketable service or product: Is there a market for your business?
• A strong business plan: What products/services do you provide? Who is your target customer? What are the benefits of your product and service for customers?
• Proof of concept: You need to be past the “big idea” stage if you want an angel to invest in your business.
• Scalability: To be investable, your business must be one that can grow, if not exponentially, then at least significantly, and fairly quickly.
• Your exit strategy: Finally, the investor will want to see that you have a viable exit strategy. Do you plan to grow, sell, etc.? How will they get their investment back?

Let’s drill down into each of these factors in more detail.

A solid entrepreneur and management team

Of all the things that an angel investor looks at, it is safe to say that the founder and her team are the most important. If the entrepreneur has a track record of success, and if her co-founders and/or management team have relevant experience in the field or otherwise have distinguished themselves, the chances of getting funded are much higher.

A marketable service or product

An angel wants to help, yes, but more than that, they want their money to make a difference and to be able to make a sizable profit. That can only happen if there is a market for your product or service, which you can tap into. Your job then is to show the investor what a great opportunity investing in your company would be. Why? Because you have something that the market wants and is willing to pay for.

A strong business plan

A business plan outlines what products/services you provide, what you want to achieve in the business and the strategy you plan to use to get there. Your business plan should also provide clarity on what direction will you head in? How much money do you need? How will you spend it? Who is the competition? What are the risks? and more.

Business owners should make sure they have a solid financial section in their business plan.

Proof of concept

An investor will want to see some early-stage success. Do you have sales? Is there a market for your product? Did it attract interest on Kickstarter? You need to be able to point to something that says yes, people are willing to pay money for what you are selling.

Scalability

Some businesses lend themselves to growth, others do not. Your business must be of the former if you seek angel investment capital.

This analysis will entail not only looking at the size of the overall market, but market trends, the competition, and your plan for tapping into the market. You need to be able to explain to the investor how their investment will make a difference; why do you need the money you seek, how will it be used, and how would it fuel your growth plan?

Your exit strategy

The investor will also want to know how he or she will get their money back. Viable exit strategies include:

• Continued, accelerated growth of the business
• Going public with an initial public offering (IPO)
• A sale of the business to a bigger corporation/competitor

What is your plan? Why is that your plan? What are the risks and rewards of that strategy versus other alternatives?

Once you understand all that goes into wooing a potential angel investor, the next question is where do you find those angels? The good news is there are a lot of sources for the female entrepreneur.

Where to find angel investors for women-owned businesses

Where do you find angel investors? There are many places.

Network

The best place to start usually is with your own extended network. Speak with family and friends, with colleagues and associates. Put the word out to your lawyer and accountant. This sort of informal networking works well because not only do they know you and your venture, they can help you get an introduction to any potential investor they may know.

Another place to network is at your local Small Business Development Center (SBDC). Part of the Small Business Administration, SBDCs are places that typically work in conjunction with local universities and offer assistance to businesses and startups. By working with your local SBDC, you can further your network and potentially meet angel investors who are part of that network.

Finally, is networking online via your social media. LinkedIn is a great place to search for and locate potential investors, as are Facebook, Instagram, and X (formerly Twitter). If you want to attract people this way, be sure that you have a strong social media presence. That is a requirement.

Online angel groups

There are many online angel groups and several are dedicated to helping fund women-owned startups. These sites serve to introduce female entrepreneurs to angel investors. Here are some sites to help you get started:

• Golden Seeds: This is an early-stage investment firm “with a focus on women leaders.”
• 37 Angels: A community of women investors “closing the gender gap in startup investing through education.”
• Angel Academe: “We invest in women-founded tech businesses. We introduce more women to angel investing.”
• Topstone angels: This is “a private investment group dedicated to bringing new and seasoned investors together with qualified entrepreneurs and start-ups.”
• Pipeline Angels: “Is changing the face of angel investing and venture capital, as well as creating funding for trans women, cis women, nonbinary, two-spirit, agender, and gender-nonconforming founders.”