What is an Angel Investor?
An angel investor is an individual who provides financial support to early-stage startups and companies, typically in exchange for equity or ownership. In the Web3 industry, angel investors are often high-net-worth individuals with a keen interest in the potential of the web3 market (crypto currency, NFTs, tokens...) and a willingness to risk their capital. They may also offer guidance or advice to help businesses grow.
Unlike venture capitalists who manage institutional funds, angel investors are independent entities, bearing their own risks and funding visions they support. Many new blockchain companies in the web3 world are funded by angel investors.
1. Find The Right Angel Investor For Your Web3 Startup
Do Your Research: Before contacting potential angel investors, you need to know who they are, which projects they have invested in, what they are looking for, and how they operate. You can use online platforms such as AngelList, Crunchbase, or LinkedIn, or focus on web3-specific angel networks like Blockchain Angels, Crypto Valley Venture Capital, or Draper Associates to find and follow angel investors active in the web3 and blockchain fields.
Prepare a Brief and Persuasive Pitch Deck： You need to prepare your pitch deck in advance, a presentation that showcases your business concept, team, progress, and vision. It is your opportunity to convince potential investors that your startup is worth their time and money. Here are some key points:
Understand Your Audience: Before you start creating your pitch deck, you need to research your target investors. Understand what they are looking for, what interests them, what they doubt, and what excites them. This will help you tailor your pitch based on their needs and preferences.
Tell a Story: A pitch deck is more than just a collection of facts and figures. It's a narrative that runs from the problem you solve to the solution you provide. You need to capture their attention, spark their curiosity, and inspire their imagination. A good approach is to use storytelling techniques such as setting the scene, introducing characters, creating conflict, and resolving it with your solution. For example, you could start your pitch by describing a real scenario where your target customer experiences a pain point that your blockchain startup can solve. Then, introduce elements of your story including your team, product, progress, and vision.
Highlight Your Unique Value Proposition: One of the main goals of the pitch deck is to show investors why your blockchain startup is different and better than existing alternatives. You need to communicate your unique value proposition, which is the core benefit your product or service offers to customers. For instance, you could demonstrate how your web3 solution is more secure, transparent, efficient, or cost-effective compared to traditional methods. You could also use data, testimonials, or case studies to support your claims and show your progress.
Keep It Simple and Clear: The pitch deck is not the place to pile all the information about your web3 startup. You should keep the pitch simple and clear so that investors can easily understand and remember your key information. Avoid using jargon, abbreviations, or complex terms that might confuse investors. Also, use a simple yet elegant design with concise text, clear fonts, and high-quality images. Aim to keep the pitch deck to 10-15 slides, with each slide conveying one main idea.
Practice and Perfect Your Pitch: Creating the pitch deck is not enough. You also need to practice and perfect your pitch until you can present it confidently and persuasively. Practice in front of a mirror, on camera, or in front of friends, and seek feedback on your content, design, and presentation style. Be mindful of your body language, voice tone, eye contact, and timing. Anticipate questions that investors might ask and prepare your answers.
Here are some questions investors typically ask,:
What is the track record of the founding team, and how reliable is their technical expertise? What do the finances, fundamentals, and business plan look like?
How large is the market opportunity and the potential for investment returns?
How pressing is the problem that the startup aims to solve, and how much value will the solution add?
Are the business model, product, and technology viable?
Does the product or network have strong community support?
What are the switching costs?
What does the competitive landscape look like? How quickly does the company need to scale before the market saturates?
Is now the right time to launch the product? More importantly, is now the right time to invest?
Finally, what is the anticipated transaction structure?
2. Use Social Media to Connect with Angel Investors
Finding and contacting angel investors can be a daunting task, especially if you lack a strong network or proven track record. Fortunately, there are online platforms that can help you connect with angel investors interested in web3 technology and innovation. Here are some key points:
Identify the Best Online Platforms for Your Startup: There are many online platforms catering to different types of startups and investors. Some of the most popular platforms include AngelList, SeedInvest, Republic, and WeFunder. These platforms allow you to create a profile for your startup, showcasing your product, team, progress, and pitch deck, and to apply for various investment opportunities. However, not all platforms are equally suitable for web3 startups. Therefore, you should conduct some research, compare the features, advantages, and disadvantages of each platform, and then choose one or more platforms to join.
Present Your Previously Prepared Pitch Deck on Online Platforms: Again, your profile and pitch deck should highlight the problem you solve, the solution provided, market opportunities and potential, competitive advantages and unique value propositions, progress and validation, team and advisors, roadmap and milestones, funding needs and usage plans.
Explain How Web3 Technology Supports or Enhances Your Solution, the benefits and challenges of using blockchain for instance, and the technical and business aspects of blockchain implementation. Use clear, concise, and engaging language, as well as visual effects, charts, graphics, and videos to illustrate your points. You should also tailor your profile and pitch deck to the specific platform and audience you are targeting, and regularly update it to reflect your progress and achievements.
Establish Connections and Interact with Angel Investors Online: Creating a profile and pitch deck is not enough to find angel investors for your web3 startup. You also need to connect and interact with them on online platforms. This can be achieved by following, liking, commenting on, and sending private messages to investors who have shown interest in web3 technology and innovation and have previously invested in similar or related projects. You can also join and participate in online communities, groups, forums, events, and webinars related to web3 and your industry.
Additionally, you can ask your existing network (such as mentors, advisors, colleagues, clients, or partners) for referrals. You should strive to build trust and rapport with investors, demonstrate your expertise and passion, and prove your value and potential. Be ready to answer their questions, address their concerns, and provide additional information or documents upon request.
5. Apply and Pitch to Angel Investors Online: The final step in finding angel investors for your web3 startup is to apply and pitch to them on online platforms. You can do this by browsing and filtering investment opportunities on each platform, choosing those that meet your criteria and goals. Carefully read and follow the instructions and requirements for each opportunity and submit your application and pitch deck before the deadline.
Be prepared to pitch your startup to investors via video call, phone, or face-to-face meetings, depending on the platform and opportunity. Practice and rehearse your pitch, anticipate and prepare for any questions and objections investors may have. Be confident, enthusiastic, and professional, and express gratitude and appreciation for the investors' time and attention. Follow up with them after your pitch and keep them updated on your status and progress.
3. Negotiating Terms and Finalising the Deal
You've found several potential angel investors for your web3 startup and are ready to pitch your idea to them. However, how do you negotiate terms and finalise the deal? This is a crucial step to secure funding and establish a long-term relationship with your investors. Here are some key points:
How to Prepare for Negotiations: Before meeting with investors, you need to do some research. Understand your valuation, progress, market size, competitors, and exit strategy. You should also know what terms you are looking for, such as the amount of funding, equity percentage, valuation cap, liquidation preferences, board seats, and milestones. You should also have a clear vision of how you will use the funds and how you intend to grow your business.
How to Communicate Your Value Proposition: When you meet with investors, you need to convince them that your startup is worth investing in. Clearly and concisely convey your value proposition. Show how your web3 solution addresses real problems, how it differs from existing solutions, and its competitive advantages. Display your progress and growth potential. Support your claims with data and evidence. Tell a compelling story that excites your investors about your vision.
How to Handle Objections and Questions: During negotiations, you may face some objections and questions from investors. Be prepared to answer these confidently and respectfully. Anticipate common questions and concerns that investors might have, such as risks, challenges, regulations, competitors, and market conditions. Address these honestly and realistically. Show that you have done your homework and have plans to overcome any obstacles. Avoid being defensive or aggressive, focusing instead on finding common ground and building trust.
How to Finalise the Deal: After negotiating terms and reaching an agreement with investors, you will formalise the deal with a term sheet, a document that outlines the main terms and conditions of the investment. Carefully review the term sheet and make sure you understand everything. Consult your lawyer and co-founders before signing any documents. Be aware of the due diligence process, a period during which investors verify the information and documents you have provided. Cooperate with the investors and provide everything they need. Remain patient and professional until the deal is completed and the funds are received.
4. Maintain Long-Term Relationships with Angel Investors for Sustained Success
One of the most important aspects of finding angel investors for your web3 startup is not only securing their investment in your idea but also maintaining a healthy and productive relationship with them throughout the lifecycle of your venture. Angel investors are not just sources of funds but also potential mentors, advisors, partners, and supporters. They can offer valuable feedback, insights, contacts, and support to help you grow your business and overcome challenges. Here are some key points:
Set Clear Expectations and Goals: Before accepting angel investment, you should have a clear and honest discussion with potential investors about their expectations of you and your expectations of them. You should agree on the terms and conditions of the investment, such as the amount, valuation, equity, milestones, exit strategies, and reporting frequency. You should also align on the vision and mission of the startup and clearly define plans to achieve these objectives. Clarifying and mutually understanding expectations and goals can help avoid future misunderstandings, conflicts, and disappointments.
Communicate Regularly and Transparently: Communication is key to any successful relationship, and it is especially important when you have an angel investor. You should keep investors informed about your progress, achievements, challenges, and needs, and seek their feedback and advice. Be open and honest about any issues or difficulties you encounter, and explain how you plan to address them. You should not hide or gloss over any bad news, as this can damage your credibility and trust. Also, respect investors’ time and preferences by communicating through their preferred channels and at a frequency they like.
Leverage the Investor's Expertise and Networks: One of the main benefits of having an angel investor is not just the capital they provide but also the knowledge, experience, skills, and networks they share, which can help you overcome obstacles and seize opportunities. You should also tap into their connections and ask them to introduce potential customers, partners, mentors, or other investors. However, you should respect and appreciate their time and resources, and avoid over-relying on or exploiting them. Demonstrate your independence and initiative, and avoid depending on the investor for everything.
Recognise and Reward Investors' Contributions: Another way to maintain a positive and lasting relationship with angel investors is to recognize and reward their contributions to the startup. Express gratitude for their support and involvement, and celebrate your achievements and milestones together. Give them due recognition and accolades, sharing your success stories and testimonials. Consider offering them privileges or rewards, such as invitations to events, access to products or services, or introducing other opportunities.
5. Build Connections in the Web3 Community to Attract Potential Angel Investors
One of the most crucial aspects of finding angel investors for your web3 startup is building connections and relationships. Here are some methods to build connections and relationships:
Attend Web3 Events and Meet-ups: Attending events and meet-ups related to your field and interests is one of the simplest and most effective ways to build connections and relationships. These events range from local gatherings to global conferences and cover various topics such as technological development, business strategies, social impact, and regulations. By participating in these events, you can meet and interact with other web3 enthusiasts, experts, developers, entrepreneurs, investors, and influencers. You can learn from their experiences, insights, and opinions, and share your own ideas and vision. Additionally, you can showcase your web3 startup and pitch your value proposition to potential angel investors who may attend these events.
Join Online Web3 Communities and Forums: joining and participating in online communities and forums about web3 topics and discussions is another way to build connections and relationships. These online platforms can help you connect with web3 enthusiasts and professionals from around the world, exchange information, ideas, and feedback. You can also showcase your web3 startup and receive feedback, advice, and referrals from the online community. Some of the most popular and active online blockchain communities and forums include Reddit, Twitter, Telegram, Discord, Medium, and Hacker News.
For example, Ethereum regularly hosts events and meet-ups globally, such as Devcon, EthCC, EthDenver, etc. These events attract thousands of participants from diverse backgrounds and industries, providing opportunities for networking, learning, and collaboration. Many successful web3 startups, such as MakerDAO, Uniswap, Chainlink, have attended these events and gained exposure, support, and funding from the Ethereum community.
6. Angel Investment in Web3 Projects
Here are examples of both successful and unsuccessful relationships between angel investors and web3 startups:
Successful Example: Coinbase, one of the largest cryptocurrency platforms, raised its initial $600,000 angel investment in 2012 from investors including Y Combinator, Alexis Ohanian, and Garry Tan. The startup maintained a close and collaborative relationship with its angel investors, who provided guidance, feedback, referrals, and support. The startup also regularly updated investors on progress and challenges and involved them in decision-making and strategy formulation. The startup eventually rewarded its investors handsomely, as it went public in 2021 with a valuation exceeding $100 billion.
Unsuccessful Example: BitClave, a blockchain-based search engine, raised $25.5 million from angel investors and an Initial Coin Offering (ICO) in 2017. However, the startup failed to deliver on its promises and expectations and faced multiple lawsuits and regulatory actions. The communication and transparency between the startup and its investors were poor, with no updates or reports provided to them. The startup also misused and wasted funds, achieving no significant progress or revenue. Ultimately, the startup shut down in 2020 and was forced to return funds to its investors and the U.S. Securities and Exchange Commission (SEC).
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