And How to Make Your Business a Top Angel Investment
Angel investors come in all shapes and sizes. From investment firms to your mom, virtually anyone can swoop in and lift a company up financially. Some of the top angel investments have become companies that change the world. Others, though not long lasting, still left their mark. What are some of the top industries angels invest in? What are some of the most notable investments by top firms?
The top 20 angel investors focus heavily on ecommerce, mobile, and internet. Other than these, healthcare takes most of the rest of the cake. You’ll see all of this reflected in our list below. Now, without further ado, our list of top angel investments.
This is the first of four healthcare related companies on our list. The wings under this one belong to the Life Science Angels. They focus on finding relief for those suffering from rare diseases.
This company focuses on therapies for kidney disease and was funded by Queen City Angels.
3. Vital Therapies
Another medical company, this one’s specialty is finding treatments for those with liver disease. The angel behind this one is Boston Harbor Angels.
The first on our list that isn’t healthcare related, TaskRabbit is an innovative company that focuses on helping people get things done around the house. Rabbits can help mount and install, move and pack, assemble furniture, do the heavy lifting, and handle general property improvement and handyman projects. The angel investment firm that lifted this one up
is Golden Seeds.
NoWait is a mobile app for restaurants. Its purpose and goal is to optimize and streamline house management. It tracks table turnover, analytics, and even the wait list to help the whole process run smoother for customers and employees in the restaurant business. These wings were brought to you by Sand Hill Angels.
This is a marketing and analytics app that is designed to help those in the marketing industry keep better track of what works, and what doesn’t. Its angel funds came from New York Angels.
The brain machine behind OpenBucks saw a definite need and sought to fill it. There is a large population of people out there than cannot pay for things online because they do not have a bank account or a credit card. OpenBucks gives these people a way to make online payments through gift cards, and they give merchants a way to accept payments from this population. TiEAngels has ties to this one.
The world was truly changed with the ability to not only send, but also to sign documents electronically. There is no telling how much time has been saved by the use of Docusign. Their angel wings belong to Alliance of Angels.
This is one of those that isn’t around anymore. They had a strong idea with healthcare kiosks,but it just didn’t catch on. It changed the world’s view of what medical could and should be however, and for that they earned a place on this list. The firm known as Blue Tree Allied Angels took a chance on them.
Food delivery, both from restaurants and grocery stores, is a fierce industry right now. Instacart, GrubHub, UberEats, and now DoorDash all want a piece of the pie. Depending on your region, you may have all of these available, or none of these, or some combination. DoorDash definitely seems to have a larger slice in many areas, which is why Keith Rabois lent his wings too it. Now with Founders Fund, Rabois is a former big shot at PayPal and LinkedIn. He now stays closer to education, sports, loyalty programs, and marketplaces.
This list of top angel investments and industries can be helpful to you, because it can help you determine if an angel investor is right for you. However, just fitting in to what investors seem to be looking for at the time doesn’t seal the deal. Attracting angel investors and convincing them to come along for the ride takes more effort than that.
Angel Investor or Venture Capitalist?
What is the difference between the two, and how do you know which one to pitch to? There are a few differences, and knowing them can actually help you decide.
Where the Money Comes From
Venture capital typically comes from a firm that uses a pool of money from various smaller investors. Angel investors use their own funds, though there are angel investment firms that allow angels to pool their money. Venture capitalists rarely use personal funds for investments.
Why and When They Invest
While both types of investors expect a profit, angel investors usually expect less. In the beginning, they are looking more to help the business get started. Venture capitalists tend to lend toward businesses that are already established.
This means that, while still looking for a profit, angel investors are willing to take on more risk.
Which One is Right for You?
If you are a startup, an angel investor is going to be much more likely to invest than a venture capitalist. Often, they even come in the form of friends and family. If you do not have friends or family ready to invest, you may need to convince an unknown angel investor that you are destined to be one of their top angel investments.
How to Convince an Angel Investor to Come on Board
While there are never any guarantees, there are some steps you can take that are looked upon favorably by investors.
- Don’t rush them.
Investing in a business is a huge deal. It takes time to make such a decision, and you should not ant them to take it lightly. Plan your time table around this so you can give them the time they need without rushing them or stressing yourself out.
- Play devil’s advocate.
Of course, you want to show confidence, portraying your belief with certainty that everything will go off without a hitch. However, one thing many top angel investments have in common is that they plan for the unexpected. When you present, show potential investors that you have taken the time to consider as many scenarios as possible and have a plan for each.
- Be clear with the numbers.
You need to run all the numbers. Most of your numbers are going to be projections. You, of course, will have to show what funds you already have, how they are budgeted, and how you plan to budget any future investment funds.
What if Being One of the Top Angel Investments is Not Enough?
Say you land an angel but you still need more. What are your options? You can always pitch to more than one angel investor. Many of the top angel investments have multiple angels. There are other options for small business funding as well.
With startups however, it can be difficult to find funding not attached to your personal credit, which is a major draw of angel investors. If you have a lower personal credit score, finding funding for your business can be a huge challenge. The better option is to find funding based on your business credit. The problem then becomes, for startups and some established business, how do you get business credit?
A new business certainly will not have a business credit score, and a business that already exists but has all funding through personal credit will not either.
How to Establish Business Credit Even With Top Angel Investments
The most important thing when establishing business credit is to establish your business as a separate entity. This is because your business credit is a credit score just for your business. It is not related to your personal credit score at all.
How do you do that? It is easiest to start at the very beginning, but if you have already been running your business for a while you can still do it.
It is possible to run a business without incorporating, but you should definitely not skip this. There is a cost associated with incorporation, but there are a few different options, so you should be able to find a balance between cost and what is actually beneficial to you.
Choose between organizing as a corporation, an S-corp, or a Limited Liability Corporation. They differ in cost and level of liability protection, but they all function equally when it comes to separating your business from your personal identity.
Get an EIN
Equally as important as incorporation is getting an EIN. This is an identifying number for your business. It acts similar to a social security number, but for your business. Once you have this, there will be no need to associate your SSN with your business for credit application purposes.
Applications will sometimes ask for your SSN as a way to deter identity theft, but if you have an EIN and business credit, your SSN will not be used to determine credit risk or pull your personal credit score in many cases.
Your business will need its own address, phone number, email address, and website. The best option is an actual, physical location separate from your own.
The phone number should be a toll-free number, and it needs to be listed in all the directories under the business name. As for email address, it should have the same URL as the website, and not be from a free service. Gmail and Yahoo addresses are not acceptable in this situation.
The website has to look and feel professional. If you cannot hire someone who knows what they are doing, consider bartering.
A website is a must these days, but one that is poorly made, has grammatical errors, or with broken links is actually just as damaging as not having one, if not more so.
Dun & Bradstreet
There are a few different business credit reporting agencies, but Dun & Bradstreet is by far the largest and most widely used. They thing is, they require businesses to have their own identifying number, called a DUNS number, in addition to and EIN, before a credit file can be opened.
To get a DUNS number, go to the Dun & Bradstreet website and apply for one. It’s free, but they will try to sell you other services. Resist the temptation. You do not need them, and the number, which you do need, is free.
Open a Business Bank Account
If you have an angel investor, they will likely require this anyway. Either way, you need a separate bank account to help separate your business from yourself for credit building purposes. Do not pay personal expenses from this account, though you can pay yourself a salary from it.
Build Business Credit Even with Top Angel Investments
Building business credit is important even if you are able to land a great angel investor. Once you have your business set up as a separate entity, you can get busy. On the front end, it can seem impossible. After all, you have to have credit to get credit, right?
Essentially, this is true, but there are some vendors, we call them “starter vendors,” that will extend net 30 terms on invoices and report those payments to the credit reporting agencies. These starter vendors are part of the vendor credit tier, and they do not check your credit score.
They may require you to make a few initial purchases or be in business for a minimum amount of time before they will extend net terms, but once you have those terms, you credit building will begin. Just be sure to make the payments! They will report it if you do not pay also, which has the opposite effect of course.
You can also request that your landlord and utilities report payments. They do not have to, but some will if you ask. The more accounts you have reporting on-time payments, the faster your business credit will grow.
Learn from the Top Angel Investments
What do all top angel investments have in common? Someone believed in them. While this has everything to do with your brilliant business idea and ability to execute, having a great start on business credit helps a ton. If an angel investor can see that you are able to continue operations with or without their funds, they are going to want in even more.
Set up your pitch, find the angel investor, and get started building business credit now so your business has nowhere to go but up.