How to Clip the Wings of an Angel Investor

I almost don’t want to say it… “Do what you love, and the money will follow.”  You’ve heard it a thousand times, but it has a whole new meaning if you are looking to raise money from angel investors.

Angel investors — high net-worth individuals who make personal bets on small companies — like to do what they love, too.  In fact, one rule of angel investing is to “invest in what you know.” As a result, many angels prefer to place bets on businesses that are squarely within their industry:

• A retired pro golfer invests in a startup that makes a novel new golf club grip
• A group of medical doctors invests in new medical devices
• An oil executive invests in energy technologies (or maybe even in new oil wells)
• A football star invests in a Fantasy League website

All of these are real examples, and they all fall neatly into what I call “affinity investments.” The angel investor simply has an affinity for the company or product — he likes it because it’s in an industry (or sport or hobby or geography) that he knows and loves.

Medicine/healthcare is the ultimate affinity-investment market.  Doctors, dentists, and life-science industry executives are plentiful and often flush with cash. They understand the market and are anxious to put their money where it will not only get a great return, but also improve the quality of life for others. Medical device entrepreneurs should always begin their money hunt with these kinds of investors.

Sports-related businesses are another natural market for affinity investors. Even Joe Sixpack can get excited about investing in a company that is related to his favorite sport.

And when an angel investor gets excited about your deal, something wonderful happens — he tells his friends. The only thing better than one affinity investor is a group of affinity investors. Spark the right person’s passion, and you are on your way.

If you need a more current example, think of technology like the iPhone, iPad, and Android. New tablet computers and smartphones are so popular that they have spawned a user base that litterally defines itself based on its favorite smartphone brand.

One startup, called AppMakr, tapped into this lucrative affiliation that people have with all things Apple. As AppMakr went through its seed round last year, its exeutives meticulously documented each step of their journey. What they learned is amazing.

Over six months and nearly 180 investor contacts, AppMakr raised $1 million from investors. The key to eventually getting 17 investors to write checks?  Finding those “super nodes” who were passionate about the industry and the idea.  The affinity spread, and AppMakr rode it all the way to the bank.

Dedicated to your (angel funded) profits,

David Worrell

PS:  I’ve raised millions from Angels and VC for my own companies and for my clients.  Learn more ways to attract the capital you need by flying over to our section just about Angel Investors... or give me a call at 704-614-2701 today!