As a startup founder, one of the biggest challenges you will face is raising capital to fund your business.

While there are many capital-raising options available, one avenue that is gaining traction is angel investment.

In Australia, there are a variety of well-established angel investment firms, funds and networks that offer startups the opportunity to access the capital they need to grow their business.

But what is unique about angel-classed investing is that it offers founders much more than just financial support to see their businesses grow.

What are angel investors?

Angel investors are groups of high-net-worth individuals who invest in early-stage startups in exchange for an ownership stake or returns in the company.

These groups typically have established reliable systems and processes that are gaining a track record, making them a valuable resource for startup founders.

The benefits of raising capital through an angel investor

One of the most significant benefits of working with angel investors is the opportunity to tap into their expertise and experience.

Angel investors typically have experience in founding and scaling successful businesses, and they can use this experience to help guide and mentor startup founders.

Angel investors also bring a wealth of connections to the table, which can be invaluable for startups looking to grow their businesses.

They can introduce founders to potential clients, partners, and other investors, helping to expand their network and increase their visibility in the market.

Another way that angel investors can add value is by providing startups with access to capital on more favourable terms than traditional financing options. This can include more flexible arrangements than a founder can achieve through a traditional bank.

This can be especially valuable for early-stage startups that may not have a proven track record or the collateral to secure traditional loans.

In addition to these benefits, angel investors typically have established systems and processes in place to help guide their founders and in turn, their investments.

For example, many angel investors will have a rigorous due diligence process for evaluating  potential investments.

This can include reviewing a startup's financials, assessing the market opportunity, and interviewing key members of the team. You can read more about what a startup needs for their due diligence process here. 

How the founder/angel investor relationship works

The relationship between a startup founder and an angel investor(s) is very hands on. The founder receives much support and a different ‘set of eyes’ looking over the business’ unique issues and opportunities.

Once an investment is made and a relationship between founder and angel investor(s) is formed, many angel investors will follow a structured process for monitoring the performance of the startup.

This can include regular check-ins with the founding team, reviewing financial statements, and providing guidance and support as needed.

It’s important to understand that this relationship should extend beyond the financial, and founders should see their angel investor(s) as a key business resource to help in shaping the future of the organisation.

That’s why choosing the right angel investor group is essential – both parties need to align on values and goals in order for the relationship to be successful.

Going beyond capital raising

Angel investment networks and funds offer startups more than just capital.

As mentioned above, they provide access to experienced investors who can offer guidance and mentorship to help startups grow and succeed. They also offer networking opportunities and can help connect startups with other investors and potential customers.

We love this quote from Susan Oliver, who is one of the founders of Scale Investments and 2021 Angel of the Year in the 2021 Australian Angel Awards…

“There is so much that needs to be rethought and reinvented – there is much scope for the creators and technologists and they need the support of funders and mentors and none are more important than the first risk takers – the angels. Often angels are also mentors, facilitators of introductions and advisors,” said Ms Oliver.

“The start-up ecosystem is on a roll. In the past 10years it has built exponentially. It is exciting, it is great to see the flow of creative solutions to important problems, it is no longer only the domain of universities and research groups – it can be your neighbour or your student. Asan angel it is a great place to learn what innovation is, where technology is heading and play a role in building Australia’s innovation ecosystem. It requires patience but the additional bonus is a good return on investments.”

As highlighted above, startups that work with angel investors not only gain access to capital on favourable terms but also gain access to the expertise and guidance of experienced investors who can help them navigate the challenges of starting and growing a business.

Angel investors typically have a deep understanding of the startup landscape and can offer valuable insights and advice to help startups succeed.

Moreover, the structured systems and processes that many angel investors use provide startups with a level of discipline and accountability that can help them achieve their goals.

A rigorous due diligence process and continual monitoring can help startups stay on track and ensure that they are making informed decisions that will drive long-term success. 

By working with angel investors, startups can gain access to the resources they need to achieve their goals and build successful businesses.