If your business is nursing a new idea along but you need additional funding to take it to the next level, you have several options. You could get a traditional business loan from a bank or you could land venture capital funding. But there is a gray area where bankers aren't willing to take the risk on your company and venture capitalists don't think your product is quite big enough to earn a significant return on their investment. Where do you turn?Angel investors.
Where a VC firm is paid to invest other people's money, an angel investor is investing his own money. Angels are usually high net worth individuals that are looking to invest in companies for various reasons. Some want to make an impact in their local economy while others are looking for a way to increase their portfolio's investment return.

The case for utilizing angel funding is easy to make, but where exactly does a startup find angel investors? There are two things to consider: attracting angel investors and seeking them out.

How to Attract Angel Investors

The same strategies you use to get a bank loan should be used with angel investors. You must have a legitimate product or service. You should have a solid business plan. Having initial customers or interested users is a good sign. In short, you need to have made progress and likely bootstrapped your way to some signs of success for an angel investor to be interested in you. If your product or service is failing and you have no customers, you can't expect anyone to give you any cash.

Seek Out an Angel Investor

Most likely you will need to seek out multiple angel investors before you get your first investment.

Where should you look? You start with your closest personal connections and work your way out.

Your Network

The first place you should look is your own personal and professional network. These are most likely to be the folks that know and believe in you. But be cautious -- your friends and family may be willing to invest money in your company, but you need to treat them all as investors, not just wealthy friends.

Your Local Economy

As you are tapping into your own network, many of the people you speak to won't be in a position to invest in your company. Be sure to always ask for referrals for local contacts in your economy. Many cities have local investment groups or small business councils for you to get advice from. They're also a great place to get angel referrals.

Your Board of Advisors

If you're smart, you have a board of advisors that formally guides you in business decisions. As these business savvy individuals are close to your business, they may want to invest. (You can also consider wooing a potential angel by inviting them to be on your advisory board.)

Angel Investment Groups

Angels run together, and many don't want to be the only investor in an organization. You should be able to find local groups of angels that meet regularly to consider investment opportunities.

Venture Capitalists

Believe it or not, your venture capitalist contacts can lead you to angel investors. Remember, they are managing the funds of wealthy investors. Some of those investors may be interested in leading a round of angel funding -- or know someone who would.