When developing an equity crowdfunding campaign, whether under Reg CF or Reg A, most startups focus on retail investors. However, if you’re only focusing on retail investors, you’re missing out on the huge financial potential that angel investors, and specifically accredited angel investors, have to offer. In this article, we’ll take a look at why accredited angel investors are so important and how to approach them for your campaign.
What is an accredited angel investor?
Accredited are investors who have reached a certain level of wealth and therefore have a special legal status when it comes to investing. In the USA, to meet the requirements, accredited investors might have a net worth of above 1M$ or a yearly salary above $200k (the full SEC definition of an accredited investor can be found here). Because accredited angel investors have much more wealth than a standard retail investor, they can invest much larger sums and have fewer limitations on the types of investments they can make. These angel investors are individual investors who invest in startups in a professional or semi-professional manner, and see it as an important part of their personal capital allocation strategy.
Why are accredited angel investors important?
While startups running a Reg CF or Reg A (“mini IPO) are allowed to raise money from virtually any investor, the general crowd of investors or “retail investors” are limited to investing smaller amounts, and tend to do so anyway since they are not necessarily financially affluent. So even if retail investors will typically make up the bulk of your crowdfunding campaign’s investors, it’s very important to approach angels and accredited investors as well. Because accredited angel investors have access to large sums of money, one accredited investor can spend as much as 100 or more retail investors combined. Additionally, accredited angel investors typically have a lot of professional and social influence. They often have valuable experience, but even more importantly they might have ties with additional investors, as well other connections that could help your business as it grows. Some of them manage syndicates that group investments from several accredited angel investors, or are part of such syndicates and can recommend your startup to the syndicate leader. Such syndicates can potentially invest large amounts of capital, sometimes akin to amounts invested in startups by venture capital funds.
However, most angel investors operate alone and make their investment decisions on their own, which means they are often quicker to decide when compared to VCs or family offices. This is especially important when you are attempting to raise capital via equity crowdfunding, where the campaign progress is often displayed publicly and the every check made by an angel investor can not only “move the needle” significantly as in of itself, but also serves to show momentum in the equity crowdfunding campaign, which in turn encourages other investors, including retail investors, to join in.
How can I find angel investors for my startup?
Finding accredited angel investors requires a bit more time and effort than finding retail investors. When you’re courting retail investors, you’re typically using B2C marketing strategies, such as Facebook ads. But to find accredited angel investors, you would need to use marketing strategies that are more similar to those used to target other businesses or top decision makers. This typically means reaching out to these accredited angel investors directly and connecting with them one-on-one. While this does require a much bigger effort than finding retail investors, the payoff could be much bigger as well.
One way to reach accredited angel investors is by connecting with groups of investors, specifically groups with a focus on angel investing. The advantage of this strategy is that you can reach many investors at one time. The downside of this is that many angel investing groups have intense due diligence processes, akin to those used by VCs or other institutional investors. These processes can be very time-consuming and usually don’t work well with the faster timeline of an equity crowdfunding campaign.
A much more effective option is to reach out to accredited angel investors directly and tell them about your offering. Many angel investors are looking for new companies to invest in, so there is a good chance they will be happy to hear from you. So the challenge is finding these angel investors, and then approaching them in a way that is efficient, respectful, and conducive to your goals. When done effectively, this conversation is mutually beneficial – you’re building an important connection with a prospective investor, and the investor has found a potential investment opportunity without having to do any of their own searching.
The easiest way to find these people is to search for lists of angel investors related to your field. Sites like CrunchBase and AngelList offer lists of investors. LinkedIn is also an amazing resource that is free to use. When searching on LinkedIn for accredited angel investors, you’ll need to deduce their accredited status from their latest positions and the other information in their profile, as this isn’t something they will have listed outright. It’s also important to note that just because an individual is wealthy does not necessarily mean that they will be interested in investing with you. Many wealthy people won’t want to take the risk of investing in a startup, so it’s important to find people who have specifically expressed interest in startup investing.
Another challenge you will come across is that some people that describe themselves as angel investors are only partially interested in actually investing, and instead are using the investor status as a leverage to connect with startups and offer them various services. So you will have to do a bit of research on each potential investor before you decide on reaching out to them.
How should I approach angel investors for my startup?
Finding qualified accredited angel investors is one of the most effective ways to get your equity crowdfunding campaign off the ground. You’ll need to be tactful when approaching any investor, but this kind of care and consideration is particularly important when reaching out to those who are accredited. A thoughtful and clear message is often the best way to get them on board.
When reaching out to accredited angel investors, you’ll want to make sure that you’re doing so in a way that is concise and thoughtful, rather than something that feels like spam. Email can be a good option as long as you are using a business email. However, using a newsletter or general email template will not foster good results, and might even damage your reputation if your outreach feels too generic or salesy. In order for your email to be impactful, it needs to feel personal. These investors typically receive a huge volume of emails each day, and they’re likely to skip over emails that feel like a mass newsletter. Emails should be personalized, and not only their content but their whole look and “feel” should be personal.
There are email services that help you do that at scale, one of our favorite ones is Woodpecker.
Connecting with accredited angel investors on LinkedIn: How to do it yourself and the challenges you’ll face
Reaching out to potential angel investors on LinkedIn is free, and there are multiple ways to do this. You can send them an InMail, or you can send them a connection request with an invitation note. It’s important to note that doing this manually can be very tedious, and it requires a lot of time and research to do successfully. However, it can have a huge payoff for your business when you do succeed. There are ways to automate or partially automate this process to reduce your workload and save time. Since LinkedIn prohibits the use of any automated use of it’s platform, it is important to be cautious about using such solutions, since done wrongly you might have your profile temporarily or even permanently suspended by LinkedIn. If you do want to automate your LinkedIn outreach you should choose only the best and most sophisticated provider. Expandi, based out of the Netherlands, claims to be the safest LinkedIn automation tool, and are completely cloud based. They offer a lot of features to help you set up a complicated drip campaign to prospective accredited angel investors via LinkedIn.
Using Expandi is a great option for startup founders that don’t have the resources to delegate this rather complicated task to an experienced agency or to hire an SDR (sales development representative) to do it for them. For founders that want to save resources but do feel they require more help and do not want to DIY their LinkedIn outreach to investors, some agencies offer a dedicated account manager to help with searches and with setting up automated outreach on LinkedIn. One such agency, that seems to receive great reviews, is Cleverly.
Another such service is LeadLoft, which helps founders systematize, focus and track their outreach to investors, but leaves most of the effort and work in the hands of the startup. LeadLoft provides it’s clients with a dashboard and software to manage their outreach, and assistance in setting up and managing the campaigns. They combine LinkedIn outreach with automated emails, so they can create more than one touch point with a potential investor on behalf of the startup founder. One of LeadLoft’s specialties is helping startup founders connect with angel investors, and they have a database of investors with their emails and LinkedIn profile links. Their system allows the founder to go through their database and select investors to reach out to, using several criteria.
While there are clear advantages to finding accredited angel investors and approaching them on LinkedIn, you must consider one very big challenge you are bound to face: finding the right ones. Many people present themselves as investors and might come out as results if you search for angel investors in LinkedIn or even with Sales Navigator, but are actually not very keen on investing. In fact, the unfortunate truth is that many people that are interested in selling their services to startups, present themselves as investors to attract startup founders to connect with them. To avoid wasting time on people that are not truly keen on investing in startups, you will have to read between the lines and be very choosy about who you actually reach out to. Moreover, you will need to try and figure out about each investor if they are actually using their LinkedIn account and checking regularly, as otherwise it would be pointless to try and connect with them on the platform. For those that don’t have capacity to do such research, or hire for such a research position, a full service or done for you service model could be the best approach.
How to connect and get calls with accredited angel investors (done for you)
Many marketing agencies specialize in helping companies find and connect in person with prospective leads, and indeed many of them focus on LinkedIn as the main platform to operate on. In the context of finding accredited angel investors, such agencies create lists of prospective investors, find their profiles on social media, LinkedIn in particular, and their emails, and finally do the work of reaching out to them on behalf of the clients. These services come at a cost and could often be priced at several thousand USD per month, because they effectively replace the cost of a full time SDR (sales development representative) and also save the need to find and train one.
There is only one such service that we know of that is focused on helping startups raising capital via equity crowdfunding: Native Lead.
Native Lead has specialized in helping startups during their Reg CF or Reg A campaigns, and has the experience of getting the founders of such startups in meetings with accredited angel investors. They have many happy customers (and testimonials to show for) and have the biggest database of public investor profiles, all checked manually by their trained personnel.
Native Lead will help you turn your LinkedIn profile to an investor magnet, then go manually through potential investor profiles to find the ones that could be a good match, reaches out to them on behalf of the startup’s CEO or founding team, and books calls with accredited angel investors on your calendar.
Native Lead is also our affiliate (*disclaimer*) and if you mention CrowdFunding.Guide or the promo code CFG22 – you will receive $300 off any service you purchase from them. You can also receive a free consultation on how to quickly fix your personal LinkedIn profile and turn it into a lead generation magnet for your current needs.
Summary
Startups raising capital via equity crowdfunding must have a strategy to raise money from accredited angel investors. There are various ways startup founders can do this, either by reaching out to angel investors themselves, or with the help of dedicated services.
