For obvious reasons, traditional money lenders are usually more willing to fund businesses that are least likely to fail. Nevertheless, just because a bank has labeled you “high-risk” doesn’t mean you can’t raise the capital you need. You still have several viable options, such as high-risk loans and merchant cash advances, grants from friends and family, crowdfunding initiatives, and of course, angel investors.
Who Are Angel Investors?
Angels are wealthy people that invest in small but promising companies. Usually, they will have cash in hand and will be ready to give it to you there and then, in return for a share of your business.
While the conditions of an investment deal will vary depending on the investor you attract, you typically won’t need to pay back any money you get, as you would with a loan. An angel is only entitled to their share of your company’s value, regardless of how much it’s worth.
Angel investors, therefore, play a high-stakes game. If your business fails, there’s no way they can recover their money. The stakes will be even higher if you’re a high-risk entrepreneur, and for that reason alone, a prospective angel may think twice before cutting the check.
Getting a High-Risk Investor
If you’ve weighed your funding options and are sure an angel investor is the best way to go, start by cleaning up your business. Deal with any issues that may deter an investor, such as bad debts, uncleared taxes, unfiled patents, unresolved lawsuits and unpaid insurance premiums. If you haven’t signed up for a payment processing scheme, fill out a high-risk merchant account instant approval application as soon as you can. The objective here is to make your business as appealing as possible to an investor.
Additionally, an angel will feel more confident in your high-risk business if they know you have put in a significant amount of your own money in it as well. You’ll need to give the investor reason to believe in you, by proving you believe in yourself.
When you’re ready to reach out to an angel investor, set your preference on one that is known to work in your specific industry. Remember, getting funded is one thing, but the real value of an angel is the expertise they can provide. A knowledgeable investor will be more equipped to helping you achieve your goals than a mere cash cow.
Lastly, draft your pitch with the target investors in mind. Do your research to know what they’re looking for in a company. Angel investors usually care less about the industry you’re in, and more about where you see yourself in the future. Therefore, a proper pitch can be all you need to get an angel onboard, even if you’re in a high-risk industry.