A Boost from Above: 4 Strategies to Help Entrepreneurs of Color Connect with Angel Investors
Entrepreneurship is not an easy game. Entrepreneurs of color, in particular, can face many additional hurdles on the path towards business success. Studies have shown that minority-owned businesses tend to receive fewer loans, and less value in loans, than their non-minority counterparts. This lack of capital makes it extremely difficult for even the most promising businesses to get off of the ground. One valuable resource entrepreneurs seek to overcome these obstacles is through angel investors.
Simply put, angel investors invest in start-ups. These investors are a key component to many entrepreneurial journeys towards success, because they provide the crucial capital that often jump-starts business growth, especially during the difficult early stages. Because start-ups are generally too young to have proven the viability of their business model, angel investors assess the value of the entrepreneur or the vision, more than the calculable profitability of the business.
Tapping into sources of funding can be challenging. However, connections with angel investors are equally business-fueled and relationship-fueled, so having a solid network is vital in overcoming many of these challenges. Check out these four strategies entrepreneurs of color can implement to most effectively connect with angel investors.
- Family, Friends, & Role Models
The easiest place to practice selling the value of your business is with those closest to you. Conversations with family and friends provide a safe space to speak passionately about your vision, without much of the pressure that comes with applying for a bank loan. If they have the means to do so, family and friends will be the people who are most enthusiastic about investing in your enterprise. What’s more, if you can communicate an innovative business idea that has the potential to succeed, family and friends will want to support your endeavors by investing in YOU. Throughout your entrepreneurship journey thus far, you have probably also connected with other business owners. Peer or role-model entrepreneurs have experienced many of the same challenges, and can identify with your story. Depending on where they are on their own entrepreneurship journey, they may be ready to venture into the investing space. Try connecting with this immediate network to warm up before reaching outside of your circle. You never know what advice, resources, or capital may result from it.
2. Angel Networks
The advancement of technology has changed the way the world does business, and it is no different for enterprise fund-seeking. Today, there exists a variety of online networks where entrepreneurs can find willing and able investors at the click of a button. The options are vast - there are investors who are interested in businesses all around the world, as well as those who prefer to invest locally. There are those who solely wish to provide funds, and those who are interested in mentorship and fostering the development of the entrepreneur as well as the business. There are even diversity-focused investor networks that center specifically on businesses led by entrepreneurs of color. Set aside some time to research these networks and hone in on what will work best for you and your business. Here are some diversity-focused investor resources to get you started:
- Minority Angel Investors Network
- 500 Startups LatAm
- Black Founders
- Latino Startup Alliance
- 20 Black Angels Worth Knowing for Minority Startups
3. Service providers
Entrepreneurs interact with many service providers, and these interactions can be leveraged to foster a warm-call with potential investors. Lawyers, accountants, and advisers are connected with other business clients who may be investors, and could be willing to make an introduction. Additionally, these professionals are familiar with you and your business, and may have the means and willingness to invest in your business themselves. Prepare to present yourself in the best light by following the Minority Business Development Agency (MBDA) advice about communicating your business’s worth:
- Prove a record of profitable performance
- Provide audited financial statements
- Show a positive net worth
- Have a strong management team and business strategy
- Demonstrate a competitive advantage in the industry
Crowdfunding is a fundraising method that mobilizes a community of supporters to further an enterprise’s growth. The JOBS Act passed in 2012 made is easier for small businesses to fundraise by easing security regulations. The result was a democratization of access to capital for minority-led startups, which may have more success garnering support from a local or online community than from more traditional sources like banks and lenders. Many angel investors are looking to equity crowdfunding platforms to diversify their portfolios, and are realizing that this emerging space comes with a few advantages. These advantages include easier exposure to a variety of businesses, transparency in evaluation, and streamlined deal-making. Take a step away from conventional methods of raising capital, and focus on tactics like crowdfunding to maximize the interpersonal aspect of your business.
I won’t mislead you… seeking funding from angel investors, or from any other source, is difficult. You will hear the word “no” more times than you can count. However, there is encouraging news - by leveraging the relationship-driven methods of fund-seeking, entrepreneurs of color can overcome the challenges associated with gaining access to capital. And success for a few can quickly transform into success for many. As diversity in the entrepreneurial space grows, the business sector will witness a more stable workforce, more wealth in more communities, and an abundance of opportunity.