What is an Angel Investor?
With the recent surge in popularity of alternative finance for start up entrepreneurs, including crowdfunding platforms, angel investment has really taken off as a concept, and has been popularised by Dragon’s Den. Angel investors can go by many names, such as seed investors, business angels or angel funders, but fundamentally, we are talking about individuals or entities who put capital into a start-up business, usually in return for part equity ownership or exchangeable debt. So, if you are a business owner in need of investment but are struggling to find funding for your business idea, an angel route could be for you.
Angel investors come in all shapes and sizes! But, to reach their current situation, they will usually have been in your position, but with a track record of start-ups, including important, learning, failures. This history has provided them with invaluable experience, and financial firepower. Hence, they are ideally placed to appraise and fund your business idea.
What do Angel Investors expect and want?
Assuming you have a meeting with an individual or group of angel investors, you want to make it count, because you are unlikely to get a second chance. You need to know what they are looking for, in terms of your business idea and the ultimate outcome. Here are a few thoughts to get you started.
The Pitch to Angel Investors
When putting your pitch, or presentation, together, you need to think about your audience. The angel investor will typically ask five basic questions: is the business idea simple enough for me to understand and get involved with, does it solve a problem or meet a need, is there a large enough market and customer base for the idea, does the entrepreneur have the right people on the team to make this a success, and finally, is this the kind of business I want to invest in? It pays to do a bit of research on this last point – what kinds of ventures have they focused on in the past, for example, do they major on high-tech start ups? A well prepared business plan and presentation is critical to demonstrate you have thought this through.
The Exit Route for Angel Investors
Before angel investors are prepared to invest in your business, they will expect to see an exit strategy. While angel investors are patient and willing to make long-term investments, they need to see how, when, and potentially how much they’re going to gain as a return on their initial funding. This could include the sale of shares to you, or the sale of the business. A realistic, full, forecast is vital, especially if it can be ‘stressed’. You should also not be surprised if angel investors want a timeline established.
Your business idea may tick all the boxes, but is it protected? Having a unique idea or way of working may be the key to your future business success but you need to protect the IP (Intellectual Property) from potential rivals. This is where angel investors can help as they will have an idea of the costs of such protection and be able to provide useful industry advice on how to stay ahead of competitors, even when they find ways round IP protection.
Rejection or reappraisal
If you have prepared a realistic business plan and forecast, made your best pitch, but are still turned down, angel investors can still help you. They can elaborate on why this was the case and how you can improve your concept to allow success if you try again or even go down different funding routes. Likewise, if they decide to go with your proposal, money won’t just be handed over and left for you to use it as you please; guidance will be provided throughout the process to make sure the investment reaches maximum potential whilst extra work or fine tuning will be suggested in certain areas to develop the original concept. Representation on your board is often a valuable option to support your venture.
Make it happen!
So if you have a business idea that needs investment, please get in touch on 07774 548822 and let me help you prepare a winning business plan and forecast, so that you can make a successful pitch to angel investors who can really help you drive your business forward!