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  • Angel Gambino

Can I Raise Capital from Angel Investors Without an MVP in Market?

In the fast-paced world of startup funding, one question that frequently arises is whether angel investors will consider investing in a startup that lacks a Minimum Viable Product (MVP) or any tangible presence in the market. This inquiry, posed during our recent Open Office Hours Virtual Lunch with Angel, delves into the heart of early-stage investment dynamics. 

Not all Angel Investors are Alike

To shed light on this matter, it's essential to appreciate the diverse landscape of investors. Unlike impersonal financial institutions, investors are individuals with varied backgrounds, preferences, and investment philosophies. Angel investors are not merely cash dispensing ATMs. While friends and family might be the initial sources of startup capital well before outreach to angel investors, accredited angel investors often seek more tangible proof or indicators of a startup's viability before committing funds. 

Why MVPs Matter

For many angel investors, the presence of an MVP or prototype serves as a litmus test for a startup's potential. It shows an angel investor that you can bootstrap and it demonstrates resourcefulness which is often a characteristic that most angel investors highly value in founders they fund. These tangible demonstrations also provide valuable insights into a product's functionality and its ability to attract users. Even in niche markets, the presence of paying customers or repeat users can signal early signs of market demand and traction, thus piquing investor interest.

However, the necessity of having a product or MVP can vary across different geographies and industries. Sectors like hardware, life sciences, and certain segments of climate tech typically demand substantial upfront investment to develop prototypes. Conversely, software or internet-based businesses may require comparatively less capital to build and test prototypes. There are also some geographic markets that tend to require more validation before angel investors choose to invest. For example, the UK and Michigan, two places where I’ve been an investor and founder, the early stage investment culture tends to be more conservative than in Silicon Valley where I live now.

What’s Your Unfair Advantage in the Market?

Beyond the product itself, investors also consider the founder's track record, their ability to navigate challenges, and any unique advantages they possess in the market. Have you had a startup hit before that made investors a good return? Do you have a job or life situation that gives you unique insights into the problem and solutions you’re trying to address? These are questions that run through an angel investor’s mind as they assess you and your business. Establishing trust and credibility with investors over time can significantly influence their decision-making process. You can do these by sharing updates as you progress. For example, sharing what you plan to do and why, then doing it, and then sharing the results and learning helps angel investors a special view into your thinking and capabilities. As a founder, it's crucial to demonstrate sound judgment in capital allocation and a clear vision for business growth. Angel investors want to know that you’re going to use their capital wisely.

Bootstrapping is a Signal

To mitigate risk at an early stage, founders can employ various strategies. These may include partnering with individuals willing to work for equity, creating clickable prototypes in figma to showcase product potential, and using GPT to help build a waitlist that gauges market demand. Ultimately, angel investors are drawn to promising founders with a compelling vision and a clear path to execution. Anything you can do to help validate there is or will be adoption of what you plan to bring to market will make it easier for an angel investor to invest.

Angel Club Mission

At Angel Club, our mission is to empower founders and investors alike. It’s our aim to create more economic equity and mobility through entrepreneurship and we can only achieve our goal if you achieve yours. Through unlimited mentorship, quarterly masterclasses, and curated networking opportunities, we provide members with the resources they need to thrive.

Jessie, the Head of Community at Angel Club, invites aspiring investors and founders to explore the benefits of Angel Club membership. By joining our community, individuals gain access to invaluable support, resources, and opportunities for growth. You can schedule a call to learn more here.

If you're ready to embark on your fundraising journey or explore the world of angel investing, schedule a call with Jessie today or reach out at Together, we'll unlock the potential for success and growth in your startup journey.

Angel Gambino, 

Founder, Angel Club


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