What is a Search Angel?

The angel round, or angel investment, refers to personal funding to assist entrepreneurs with expertise or unique concepts who lack their own funds to start a business, and to bear the high risks of entrepreneurship and enjoy the high returns after successful entrepreneurship, or Said to be a one-time upfront investment by a free investor or an informal venture capital agency into an original project idea or a small start-up. Angel investment is a special form of venture capital.

Angel Investment ^[1]

Angel Investment has not yet formed a strong investment group in China. However, because angel investment is hidden in private capital, the amount is huge, which can greatly meet the funding needs of start-up enterprises, and it is an important financing method for entrepreneurs. Although angel investment is effective in helping startups, it is not easy to get angel investors to pay. The process of obtaining angel investor support is the process of demonstrating the investment value of entrepreneurial enterprises and developing entrepreneurial entrepreneurial financing skills. Generally, the following issues should be paid attention to ^[2]

The value of traditional enterprises invested by angel investors is generally between 2 million and 5 million, which is reasonable. If the entrepreneur's valuation of the company is less than 2 million, then either he has insufficient experience or the company does not have much development prospects; if the valuation of the company is higher than 5 million, then the 5 million yuan cap method can be used to show that angel investors Investment is not cost effective ^[2] .

However, Internet companies are developing rapidly and are more likely to go public quickly. When evaluating Internet companies, angel investors cannot be confined to traditional evaluation methods, otherwise they will lose good investment opportunities. Taking into account the characteristics of the value fluctuations of Internet companies, that is, the scope of enterprise value assessment in the start-up period has increased from the traditional 2 million to 5 million yuan to 2 million to 10 million yuan. Now many angels have mentioned the upper limit of 20 million.

We need to figure out how much equity we want to give investors. It can't be more than 50% anyway, because it will make you, the founder, lose the motivation to work hard. Similarly, it cannot be 40%, because it leaves little room for the next round of investors. If you get a lot of seed money, 30% would be reasonable. But in this case we are discussing, what you want is a relatively small investment of $ 100,000. So, you might give 5-20% equity, depending on your valuation.

In the process of angel investment, angel investors should not only consider their own investment income, but also should take the role of "actual entrepreneurs to help them realize their dreams". Therefore, for investors who want to take more shares, entrepreneurs also need to be cautious. But the dark horse's suggestion is that when the project is still in the angel phase or the seed phase, the entrepreneur's attitude should be "take it if you have the money", because the most important thing at this stage is to put the idea into production first and produce the product. Angel investors' investment helps provide the initial momentum for the project.

Many entrepreneurs hope to get a relatively high valuation in the angel round. Not necessarily. When you get a high valuation in the seed round, you need a higher valuation in the next round. This means you need to grow very much between rounds.

One lesson learned is that within 18 months you need to prove that your business has grown tenfold. If you can't, you must either accept the often unfavorable terms for a low valuation financing and have to hope that someone is willing to throw more money into a slow growing business; or just wait to run out of cash Closed afterwards.

Therefore, the higher the valuation, the better.