How to Find Angel Investors: A Guide for Entrepreneurs
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Want to learn how to raise seed funding for your startup? You’re in the right place. Here, we’re going to talk about how to raise seed funding (and even pre-seed funding), without venture capital.
The seed round is the first official stage of equity funding. That means that you can expect to give up some ownership, typically in equity or a convertible note, in exchange for capital. Need more detail? Check out our in-depth article to learn more about different types of funding for startups. For growth-focused startups, getting access to capital early means that you can scale faster.
But let’s get back to the money question: how do you raise seed funding for your startup?
In this article, you’ll learn:
Let’s dive in:
Seed funding is the initial capital raised by a startup to get off the ground. This funding is used to cover expenses such as building the MVP and product development, furthering traction, conducting deeper market research, and hiring a team. We define seed funding in much greater depth in this article, 10 Types of Funding for Startups.
Why should you raise a seed round? There are three core benefits of raising seed funding:
Venture Capital
Venture capital is an option, albeit a longshot. Research shows that less than one percent of startups get VC funding. Of that fraction, just 2.2% of funding went to Black founders, and only 2.7% went to female founders. In late 2022 and early 2023, venture funding began slowing down, and we expect to see that continue. Plus, this process of pitching to VCs often takes months or even years. For many founders, VC funding isn’t really a viable option.
Angel Investors
Angel investors are high net worth individuals who invest their own money in startups in exchange for equity. Angel investors typically invest in startups at the seed stage and provide funding ranging from $10,000 to $1 million.
As you can see, although these options are incredibly valuable, these types of capital tend to be incredibly difficult to secure. There are a plethora of other funding options available - and we’re going to dive into those next.
So if you’re an ambitious founder who doesn’t fit the mold, how can you raise pre-seed or seed funding?
Fortunately, a new wave of seed funding sources are emerging, designed to be more accessible and more founder-friendly. Here are 5 alternative ways to get seed funding for your startup.
Crowdfunding platforms allow startups to raise seed funding from a large number of individual investors. Here are two that are experts in startup funding.
Republic
Republic leads the venture crowdfunding space. It’s a platform app that lets startups raise capital through crowdfunding from individual and institutional investors.This crowdfunded approach lets startups raise pre-seed and seed funding from a healthy network of enthusiastic investors, without needing to spend hours on pitch meetings.
Republic does require startups to go through a tough screening process; only around 5% of startups will be accepted. That said, they do offer a unique opportunity to get in front of a lot of different investors quickly, without needing to pitch each individually. It’s a tough but streamlined way to get seed funding for your startup. Learn more about how they evaluate startups here.
If you decide you want to apply, you can do so here.
WeFunder
WeFunder is another powerful venture crowdfunding platform. With WeFunder, unaccredited investors can invest as little as $100 in startups and small businesses they believe in. It's open to both startups and small businesses, so more founders might be a fit here. Learn more about raising on WeFunder.
Stonks
Part crowdfunding, part pitch day, Stonks is a new approach to crowdfunding. If accepted, you'll host a live pitch event during which investors can commit and wire funds. Learn more here.
There’s a wide variety of new financial options. These don’t look like traditional venture capital, and can help founders access capital in ways that are more flexible and more aligned to their current growth stage.
Chisos
Here at Chisos, we're offering a brand-new way of investing in idea- and early-stage startups through a two-part approach we call a CISA. The CISA is a unique combination of equity and an income share agreement. Unlike other investment options, you can qualify for pre-seed and seed funding from Chisos even before you have a product or any revenue.
We’ve designed the CISA to be fair to founders. Here’s how:
We’re built on the idea that funding shouldn’t be limited to a tiny handful of founders. Instead, we’re on a mission to democratize entrepreneurship.
We’re writing checks of $15,000-50,000 to invest in idea-stage startups and side-hustle businesses. Want to see if you qualify for pre-seed or seed round funding?
Incubators and accelerators provide seed funding, mentorship, and/or resources to startups in exchange for equity. Some of the most popular have become known as kingmakers, and are a prestige “get” that can make later-stage fundraising easier.
KnowCap
If you’re planning to use seed funding to hire a team, why not skip a step and trade equity for expertise? That’s the thinking behind KnowCap. KnowCap connects companies to a team of startup experts that cover key functions, including marketing, sales, engineering, and strategy.
These experts work directly with founders to provide coaching, strategic guidance, and in many cases, actually creating value by building an MVP of the product, creating new brand identity, and setting up calls with potential customers. In exchange for access to this “knowledge capital,” founders grant KnowCap equity.
While it's not pre-seed or seed funding in a traditional sense, it's a great alternative to help founders build a strong foundation from which the company can grow.
Learn more about KnowCap here.
Powerful communities can help you connect to investors and mentors at the earliest stages. There are a hundred and one options, and there may be
Zebras Unite
Zebras Unite is a startup co-op that’s built explicitly to serve founders that traditional VC overlooks and undervalues; namely, women and people of color. What started as a community has evolved into a source of capital.
You've probably heard startups described as "unicorns"; Zebras Unite is an intentional rejection of the unicorn model of success. (You can read more about this concept here.)
Zebras Unite is the place for founders who believe that business should support society, rather than define it. If you’re building a community-focused, mission-driven organization, you’ll probably feel right at home in the Zebras Unite ecosystem.
To be considered for funding, join the Zebras Unite online community.
Angels + Entrepreneurs
Considered one of the better online angel investing communities, Angels + Entrepreneurs connects founders to prospective investors. Once a founder is selected to be featured, they have access to a few visibility opportunities. You will have to become a member to be considered. Learn more about joining A+E.
There are a bevvy of grants for early-stage startups and small businesses. Unlike most other seed funding sources, grants don’t require you to give up equity or pay the money back.
Startup grant programs typically focus on serving otherwise underserved groups, such as minorities, veterans, people from rural communities, and non-profits. They also typically focus on advancing specific sectors, like education, technology, and healthcare.
Unfortunately, there’s no central database that covers all available grant opportunities, so you’ll need to spend time researching if you pursue this path. Here’s a list of a few good places to start, including:
So that’s it! Now you know 5 new ways to raise seed funding for your startup.
This is one of the most frequently asked questions we get when it comes to startup fundraising. Lucky for you, we recently published an article all about how to find investors for your startup.
Keep in mind that, if you go through one of the alternative options we mentioned above, your process will look very different than connecting directly with investors.
Bottom line: seed funding can be a game-changer for your startup, providing you with the early capital you need to get off the ground and bring your product or service to market. We hope this list of alternatives to venture capital provides the insight you need to get out there and raise your seed round!
Please note that the Chisos team does have relationships and affiliations with some of the organizations on this list. However, we weren't paid for including them on this list. We're working with them and recommending them because we believe in what they're doing.
Have questions? Send a note to hello@chisos.io and we’ll get back to you.
