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How to become an Angel Investor with $5,000

How to become an Angel Investor isn’t as difficult as you might think. Entrepreneurs everywhere are looking for people to invest in their company.  In many cases, they start off accepting as little as $5,000 for minimum investments.

Most Angel Investors are more forgiving when being pitched by entrepreneurs. They are looking for passion from the pitch the entrepreneur gives. Even if they don’t make an investment, they’ll be helping the entrepreneur to make a better presentation with the next prospective investor.

The Angel Investor has many reasons for choosing to invest in entrepreneurial businesses. Sometimes they want to give back to the community. Perhaps the entrepreneur has a technology or service that addresses needs that are close to your heart. Other times you may invest for the opportunity to make a huge windfall.

If you’re investing for the last reason, you should be extremely careful. The money you invest should be considered throw-away money. Its money that you can easily afford to lose and will not affect your lifestyle.  This type of investment is almost as risky as going to Vegas and playing poker.

There are some advantages to investing into entrepreneurial startups in certain areas. Make sure you check with your CPA as you may have special tax incentives inside your state reducing your investment risk. I’ve benefited from being able to use tax credits to encourage investors to take chances on my business.

Before making an investment, you’ll need to verify that all documents are in place and appropriate. You can check with your attorney to verify any information necessary. In the normal course of business, the entrepreneur will have a corporate attorney who has advised them and prepared the proper documents. The investor should not be the one putting documents together.

This is a list of certain documents that may or may not be required to complete an investment transaction. Having your attorney review the documents is highly recommended.

  • Executive Summary
  • Forward Looking Projections showing burn rate
  • Balance Sheet
  • Subscription Agreement
  • PPM (Private Placement Memorandum) – Not required for all situations

Use the following resources to locate emerging entrepreneurs:

  • Chamber of Commerce
  • Local business incubator
  • City Council
  • Local Economic Development Commission
  • Local SBA office
  • Inquire with fellow members of clubs and organizations

I’m excited that you took the time to read this post and are considering making investments in entrepreneurs. The community needs more people willing to do their part for our economy.