Legally speaking, angel investors are required by the Securities and Exchange Commission to have assets of at least $1 million. According to the Center for Venture Research at the University of New Hampshire, there are approximately 4000,000 active angels in the US. Typically, angels are self-made entrepreneur millionaires who are looking for investments with a ROI from 10-20 percent and usually invest anywhere from $10,000 to $250,000 on a given venture. They will usually be knowledgeable in the industry or market of your venture and will want to be actively involved in your business if they choose to invest (they're usually in it for more than just the money).
How do you find them?
The Internet has made finding angels much easier than it used to be. Try searching AngelSociety, Business Partners, and PrivateInvestor. These sources provide invaluable advice, assistance, and information regarding potential investors and entrepreneurs seeking capital.
Other successful entrepreneurs should be able to point you in the right direction as well, and if the investors they point you to aren't in the appropriate industry/market, they may be able to point you in the right direction. In addition, one of the best ways to find informal investors is through tax attorneys, accountants, bankers, and other professionals. University faculty can be another great source (many universities work with these investors).
Contacting Investors
If you have received a referral from one of the above professional sources, you should ask whether or not you can use the referral's name when contacting the investor. It's preferable to utilize a referral source to forge a connection between you and the potential investor. At any rate, you should formally meet with the investor in order to propose the venture. He or she (96% of angels are men) will want to know all the primary details of the venture such as the market opportunity, why it is compelling, how the business will make money, why the team is right, what is the exit strategy, etc. However, you should be prepared to cover just about anything and everything. This should be obvious.
Evaluation Process
If the investor is interested beyond the initial meeting, he/she will want to evaluate the venture in more detail. The investor isn't about to hand you 50 grand without doing they're homework. They will want to review your business plan, the management team, a prototype if applicable, as well as any other relevant details. You should make this as convenient as possible for the investor setting up any necessary meetings at his/her convenience and having all the necessary information needed available at request.
The Decision
If the investor decides to invest, he or she will have an attorney draft an investment agreement. You should do some research prior to the contract agreement to determine what kind of deal you can and want to make. It's advised that you have a personal, experienced attorney at your side to insure that you don't end up making any big mistakes.
On the other hand, if the investor is not interested, you're not at total loss. Try asking the angel for any other investors who may be interested in your venture.