Why angel investment can still give crowdfunding a run for its money

Finally, you’ve done it – you’ve thought of that million dollar business idea. There’s just one problem, you haven’t got a penny to get it off the ground with. You need funding, but where do you go to look for it?

There was a time when starting a new business venture was a veritable impossibility for anyone without a heap of cash or connections. Luckily for you this is no longer the case. You now have a number of options available to you, including venture capital funding, angel investors and, in recent years, crowdfunding sites such as Kickstarter and Indiegogo.

Realistically, VC investment probably won’t be suitable, as they are set up to provide funding for high risk ventures and would ordinarily expect to invest a minimum of $3M. Friends and family are probably the riskiest option of all, if you value those kind of relationships. So that leaves us with angels and crowdfunding, both have pros and cons, but which one’s right for you?

One of the biggest advantages of crowdfunding is that none of your ‘investors’ actually receive shares, so you won’t have to give away any control. Angels on the other hand are seasoned, successful business people and will expect a significant stake in the company. They will also insist you provide solid proof of business potential such as market research, a business plan, and projections.

So far, crowdfunding sounds like a lot more fun right? You get to make a promotional video, the investors have zero control and all you have to give them is a few trinkets and a free sample or some other ‘reward’. Plus, you gets lots of publicity to boot. And yes it’s true, crowdfunding can be incredibly liberating, but that’s not always necessarily a good thing. Sometimes this kind of freedom can also allow many to jump in with two feet, where they should tread more carefully. There is a temptation with crowdfunding to get too caught up in the sheer accessibility and buzz, and forget that you’re not building a SimCity fictional business here, but a real enterprise.

The thing about real businesses is that they’re not all fun and games, they’re actually a lot of hard work. This is what securing an angel investor prepares you for. An angel will ask you to face hard facts, like how quickly can you realistically produce your product, and when you do, whether there will be a real, sustainable market for it. Now, you might say that crowdfunding is itself a form of research, but don’t forget that crowdfunding folk usually consist of early adopters and are therefore rarely representative of the mainstream public.

The most important thing to remember however, is that the true test of a company comes once all the funds have been raised and it’s time to actually run the business and get customers in. Crowdfunding cannot and will not ever be able to offer you the knowledge, experience and networking opportunities that come with a savvy entrepreneur with a serious stake and therefore, interest in your company.

If this is the kind of support you feel your company requires, then an angel investor may just be the answer to your prayers.

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