You have your angel investors – now what?

During our angel investor blog series, we have been giving you the lowdown on angel investors: how to find them, what they are looking for in your startup and how to make the most of your relationship with an angel investor. We hope this will help you to determine if seeking angel investment for your startup is the best way to go.

Last week we talked about the angel investment timeline from pitch to cash, and this week we build on that and discuss what you do once you have your angel investor. It may feel like a time for celebrating but this is when the hard work starts!

How to work with an angel investor after you have received funding.

Angel investors have invested money into your company after discussing your projected success during the pitch and subsequent meetings, so you can’t rest on your laurels now. It’s time to put into action everything you have been planning for. Take time developing a successful working relationship with your angel investor and utilise their skills and experience to support your work – whether that be recruitment decisions or bringing in expertise to advise in marketing. Ensure you have regular reviews and monitor spend while also adding key milestones to work towards. Whether they are a product launch or KPIs of target revenue and customer base, make them clear and agreed so there are no surprises for anyone as you progress.

The next funding round.

When pitching to potential angel investors, you will have included how much money you needed and how long you expected the money to last, which will give you an idea how long you have to go until the next step: an additional funding round. Your business will get to a certain point and will not be able to grow any more without further funding. The likelihood is you have in mind what you’d like to do with additional funding and what step it will help you to get to. You can make this decision using your board and advisors, and by conducting analysis on what direction you would like to go in and what money is required.

You should be seeking further investment long before the first round of finance runs out – typically around 9 months after the first round is complete and in the UK, would likely seek funding under EIS. To gain investment at this stage you will need to show more than simply a good idea, for example, you’ve started to make revenue, your product has been built and launched and your team is the full complement. Both SEIS and EIS provide generous tax benefits to investors and so are attractive to budding angels. Any further than this and you’ll need to show your worth and cross the next challenging hurdle or Series A funding.

To use the same angel investor or look for alternative funding?

This time is also a great opportunity to reflect on your relationship with your angel investor. Do you seek follow on money from them? Or decide to look in a different direction? Or does your company need more money than they are able to invest and you need to seek a wider base of investors? Whatever the decision, use your board and work collaboratively to make the best decision for your business – unless you have a devil as an angel, they’ll want the best for your company too.

Angel investors may only invest in early stage as it is the most attractive to them but may have contacts and collaborators who invest in the next stage, or join a group of angels to spread the cost and risk.

Whatever you decide after the first round can affect your control on the company and the direction your business goes in but can bring huge rewards and if you’re a serial entrepreneur, provide you with the funds to invest in your next big idea. Running a startup funded by angel investors can feel like a cycle where you you are moving from one investment round to another, but having the support and expert advice from your angel investors can be invaluable to the success of your company.