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Starting a business with the help of angel investors

As the saying goes, it takes money to make money. One needs resources in order to turn an idea into a reality. Unfortunately, gathering start-up capital is often one of the most difficult aspects of starting a business. Enter: Angel investors.

Angel investors is the term used to describe wealthy individuals or groups who invest in new businesses in exchange for equity. According to the Center for Venture Research at the University of New Hampshire, 66,000 ventures benefited from angel funding in 2011. This number is up 7.3 percent from 2010. The total amount of angel investments last year was $22.5 billion.

Angel investors most commonly invest in technology startups, but are known to invest in a diverse array of industries as well. For example, a team of recent college graduates was able to procure $400,000 in just a few months for their fashion company. In 2009, the founder of an online marketplace for custom products gathered $500,000 in three months. Later, in 2010, the company secured an additional $1.1 million in investments.

The man behind the company said the trick to getting the angels' blessings is persistence. If hearing the word "no" is a problem, then seeking angel funding is not the way to go. Most meetings end in rejection, but it is critical to stay positive and focused.

Securing angel funding is quite difficult. According to experts, only 5 percent of those seeking funding actually get it. In order to increase one's chances of success, experts suggest, new entrepreneurs should give a pitch in which they clearly state their target market, business model, and competition. It is also important not to overstate one's capabilities or offer exaggerated revenue projections.

Also, says one former entrepreneur and current angel investor, it is always a good idea to discuss the strength and capabilities of one's leadership. Investors are not only investing in an idea, but they are investing in the people behind it.

Source: The Wall Street Journal, "'Angels' Can Fund Your Next Step," Sarah Needleman, Aug. 25, 2012.

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