Sunday, March 6, 2011

Raising capital from non-strangers, not angels

Over the years, I have counseled clients who set out to raise capital from angel investors that they need to focus on angels with whom they have relationships, directly or indirectly. The probability of raising capital from angels with whom the entrepreneur has no relationship is extremely low. Therefore, logically, the entrepreneur must start developing or pursuing relationships with potential angel investors from the get-go since these relationships are difficult and time consuming to develop.

I've decided to call angels with whom an entrepreneur has relationships Non-Strangers. This seems like an odd name, but it is descriptive of the angels who actually invest in most companies. Yet, most entrepreneurs don't get it. They think that they can simply find wealthy people, present a business plan and some of them will invest. This is usually a waste of time for both the entrepreneur and the wealthy person.

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