Funding Start-ups


Angel investors questions and answers for African entrepreneurs. This article answers ten questions about angel investors that African entrepreneurs would find useful.

As angel investors are increasingly making cross-border investments, African entrepreneurs with brilliant ideas that solve real problems might find willing angel investors from across the world.

Here are 10 question and answers that would help clarify what angel investors are looking for in entrepreneurs and how best to attract the right business angel.

Angel investors questions and answers for African entrepreneurs

Why are angel investors interested in entrepreneurs?

Angel investing is when individuals rather than institutions invest their personal capital in an early stage company.

This early stage company is called a start-up. Angel investors or business angels as they are sometimes called , invest money in companies they hope will grow.

And when these companies grow, they bring them significant profit.

In addition, investing in start-ups give angel investors the opportunity to advise and mentor entrepreneurs.

Also, they themselves learn new things. Sometimes angel investors help entrepreneurs to refine their business plan in response to market changes.

Not everyone who claims to be a business angel makes money from their investments.

Those that make money are usually the business angels that have a portfolio of well selected and managed start-ups.

Such business angels make up to 25%-plus annualized returns on their investments.

So, reasons why angel investors are interested in start-ups include:

  • Financial motivation – there’s an expectation of economic returns
  • Social giveback – many angel investors are or were entrepreneurs. So, there’s a strong connection to start-ups.
  • For some, it is about the thrill and opportunity to do what they love.

Why would an angel investor say no to an entrepreneur?

There are many reasons an angel investor may say no to an entrepreneur. Here are some of the reasons:

  • If an entrepreneur does not show optimism and enthusiasm.
  • Signs of an entrepreneur’s unwillingness to take advise may also lead to rejection.
  • Also, if the entrepreneur is not technologically up-to-date.
  • An angel investor looks out for personal references, if an entrepreneur doesn’t have suitable references, the chances of getting a yes is slim.
  • Lack of good education. Many angel investors would not support drop-outs.
  • In addition, a business angel would say no if the entrepreneur is perceived to lack integrity.
  • If an entrepreneur is unrealistic in their business ideas, their cost assessments and financial projections don’t make sense.
  • In addition, an angel investor might say no if the entrepreneur cannot demonstrate technical expertise.

Angel investors questions and answers for African entrepreneurs. Question 3.

Does an angel investor take control of a start-up?

No an entrepreneur has control or should have full control of the start-up. Although there are shark angel investors who want to take control of a start-up.

Most successful business angels want you (the entrepreneur) to be in control. That is one of their success secrets.

Therefore, an entrepreneur who has an idea, who knows how to execute that idea using the right tools, would attract a smart angel investor and not a shark.

How do I choose the right angel investor?

Entrepreneurs should choose an angel investor that resonates with them. That should be the first choice before the money

You’ll be grateful later on, that you chose an angel that shares your values. You’re better off with an investor who would stick with you for long.

That is, one that appreciates and values you as an individual not just your company.

Is my rich uncle who invested in my business an angel investor?

No, your rich uncle who invested in your business is not an angel investor. There are two classes of investors: the formal and informal investors.

The formal investors are institutional investors such as banks, venture capitalists and other financial institutions that invest in businesses.

The informal investors are individuals who use their own personal money to provide capital for a business owned by someone else.

Under informal investors we have the family and friends investors. These are individuals who invest their personal money to provide capital for family, friends, neighbours or colleagues. Your rich uncle belongs to this class of investors.

Although angel investors are also informal investors, they differ from family and friends investors.

An angel investor provides their own personal money as capital for a business in the form of debt or equity to a business not owned by family member or friends.

Are all business angels wealthy?

Although there are people who are not wealthy (not high net worth) individuals, who are angel investors.

However, angel investors are likely to be wealthy people often called high net worth individuals.

What is the difference between a passive and an active angel investor?

The main difference between a passive and an active angel investor is that, the former invests their personal money in the company but is not involved in the development and running of the business.

Whereas, the latter invests their personal money in the business and is also involved in the running and the development of the business.

What qualities do angel investors look for in an entrepreneur?

Generally, business angels look for qualities that would make a company grow, in an entrepreneur.

They look for qualities such as: leadership, creativity, knowledge, integrity and experience.

What financial documents do angel investors require?

As mentioned earlier, economic motivation is one of the reasons for angel investors’ interest in start-ups.

Therefore, any information that is closely linked to that is of interest to them.

For example, they want to know if you have good margins and whether you can generate scalable revenue.

Similarly, they want to know if your business will generate more cash than it will spend.

Also of equal importance is the information about when your business will become profitable.

So, business angels will typically ask for information found in these three financial statements -the income statement, the balance sheet and the cash flow statement.

How can I find an angel investor?

High net worth individuals (HNIs) tend to be very busy and they also guard their privacy. So making cold calls might not be possible or ideal.

However, you can make use of your personal networks – family, friends or friend of friends that know HNIs.

Also, your bankers can also be of help – they tend to know HNIs.

Other ways to find angel investors is through start-up conferences, business plan and business pitch competitions and through incubators and accelerators.

Funding Start-ups


Angel investors for African start-ups. Are you an entrepreneur with an innovative idea but with no access to adequate funds?

You are not alone. Lack of access to adequate capital is one of the main challenges businesses in Africa face in their start-up stage.

An African start-up is a business in its early stages founded in Africa or founded by Africans, with unique product or service to bring to a market. An African start-up is founded by one or more entrepreneurs.

An angel investor is typically a High Net Worth Individual (HNI).

That is, an angel investor is typically a high net worth individual (HNI) who invests time and money in start-ups.

African start-ups, business angels, funding for start-ups

Characteristics of an angel investor

Here are simple ways to identify an angel investor:

High net worth individual

An angel investor is a high net worth individual (HNI). A HNI is a rich person with a net worth of between $1 million and $30 million.

According to Forbes, Africa does not lack high net worth individuals (HNI). For example, there are over 40,000 millionaires in South Africa.

In addition, a research among emerging nations in Africa, Europe and Asia shows that Nigeria is the fastest growing high net worth country.

The country is set to see a compound annual rate increase in high net worth population between 2019-2023.

It simply means that a set of calculations is used to calculate and determine the returns for the assets and investments of individuals over a five year period.

The results show that Nigeria leads by 16.3%.

Apart from HNIs, African start-ups can also find capital through:

Angel investor groups

Angel investor groups are groups of individuals rather than an individual business angel.

Therefore, angel investor groups consist of individuals that collectively fund start-ups.

Coming together as a group of investors helps them pool more resources.

In addition, it helps to lower their investment risks. These type of angel investors tend to target particular geographical regions.

Diaspora angel investors

These are Africans and their networks abroad with the capacities and willingness to provide funds and mentorship support to African start-ups.

Diaspora angel investors also tend to target the home countries or regions where diasporans have knowledge of the market.

Increasingly, angel investors are becoming transnational, covering wider geographical regions.

Knowledge and experience

An angel investor tend to have a great deal of experience and is very knowledgeable. They are often individuals that have been captains of their industry.

They have held and excelled at executive positions. They know what it takes to get a business up and running.

It is believed that the best angel investors are those who in addition to money, provide wisdom, guidance and contacts based on their personal experience.

High tolerance for risk

An angel investor is likely to invest in start-ups because they have a high tolerance for risk.

This is because, business angels like to help entrepreneurs in fulfilling their mission of providing innovative solutions to local challenges.

High tolerance for failure

They know that it’s a risky investment and start-ups can fail. An angel investor is a risk taker like the entrepreneur they are investing in their business.

Brilliant ideas

An angel investor loves brilliant ideas and is willing to learn. Business angels are interested in ideas that are unique.

They are always looking out for ideas that propose to solve real problems.


Trust is a critical factor for a business angel. Your business idea is like a bet to an angel investor.

Therefore, a business angel is always asking questions like, “do I trust him/her?”.

The angel investor is also interested in your answers to “why you” questions.

Loves diligent entrepreneurs

An angel investor loves diligent entrepreneurs. A business angel wants to see your carefully laid out plan and effort.

Business angels love entrepreneurs that know what the deal is.

Those who do not see business angels as only a source of cash.

A business angel wants to see your plan for your business and how they (business angel) fit into your business.

Time and flexibility

Angel investors are more flexible and patient because they invest their own money unlike venture capitalists with strict timelines.

As a result, angel investors are more suited for the emerging markets where business takes a longer time to grow.

In the rest of this article, I’ll go through ways you can find angel investors for your start-up.

Angel investors for African start-ups. Business angels.

How to find angel investors for African start-ups

Here are a few ways you can identify and connect with an angel investor:

Personal connections to find angel investors

You can make use of your personal connection such as family and friends to link you up with a HNI who might be interested in your idea.

Also, through personal connections you can reach diaspora investors who typically would want to invest based on trust.

In addition, a professional connection on LinkedIn could be the link that connects you to an angel investor.

Angel investor groups

You can look out for calls for submission by angel investor groups.

Accelerators and incubators to find angel investors

Accelerators and incubators can help you find and prepare for meeting angel investors for funding.

Pitch or business plan competitions

Universities and corporate organizations sometimes organize pitch or business plan competitions.

You can participate in any of these competitions. Winners are usually able to access funding from HNIs.

Meeting angel investors at conferences and events

Industry events and start-up conferences are also opportunities for start-ups. Get your elevator pitch ready. You might run into a HNI.

In such events you get to introduce your product or service and you can attract the right angel investor.

Online angel investor networks

The internet has made it possible for African start-ups to have wider access to potential angel investors.

In such websites, you see profiles of investors and the type of start-ups and the locations of interest.


Despite the growing numbers of high net worth individuals in Africans, many are not investing in  start-ups.

It is believed that most rich Africans do not invest in start-ups because they do not understand the asset class.

Many of them did not make their fortune through technology, so may not understand the innovation terrain

For example, according to Forbes in 2018 whereas $133.5M venture capital was invested in Nigeria. Only $1.5M was invested by the Lagos Angel Network – the largest angel investment network in Africa.

With the increase in cross-border investments by angel investors in start-ups, there is hope for African start-ups.

Well prepared entrepreneurs with the right ideas will benefit from this trend.