Angel Investor Funding
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Business Angels are known to be a shrewd bunch, so really just how hard is it to get funding for your business?
According to the National Business Angel Investor Network (NBAN) of the UK, greater than 9 out of 10 entrepreneurs fail to attract any form of investment in their enterprise. Lets think about that for a moment. You have less than a 10% chance of convincing anyone to back you. Hmm.
In return your Angel Investor will require a part share in the ownership of your company. They will require exemplary returns on their investment. (These kinds of investors have many alternative business opportunities in which they can invest their capital. Yours must appear to be perfect on the risk /reward seesaw), with a definite exit plan (such as selling the company, or buying their shareholding), to realise their returns. If your company is in a position to be paying dividends, then you will also be paying them to your business angels.
When raising investment capital you have to find individuals or groups with money to invest (no mean feat in itself), and you then have to stand out from the crowd in order to win their short attention span, build trust as quickly as possible, and convince them of your outstanding management record and amazing business opportunity.
We are back to that hoary old chestnut once again. Your business plan will be the mainstay of any presentation or representation with the goal of obtaining funding.
Before you enter into any search you will have to be clear about the amount of funding you will need, how that funding will be used, and how you will reward that investment and what the exit strategies are that you will offer any kind of business angel. Remember, tailor your business plan to the audience.
No one is going to come anywhere near you with their own capital unless you have put in as much as you can afford (and in most cases more than you can afford. You must have a major motivation for making it work, and the risk of losing your shirt is considered appropriate.) If you won’t back your own judgement with your own money, then why should anybody else? (this tenet is also true when applying for small business loans.)
Start with the so called ‘soft’ targets when you’re searching for investor capital. The people who know you and trust you. Relatives, friends, business colleagues. Even if you fail, the value of presenting your plan, and the chance to get some quality feedback about it cannot be discounted.
If you’re already in business consider approaching your favourite supplier. (If your business continues to grow then so does theirs…)
Your Doctor and your Dentist spring to mind as people whom you know who may have spare cash to speculate with.
Look in local papers for articles about active entrepreneurs who are successful. They may be convinced in your idea enough to invest. If nothing else they will have ideas and advice to contribute.
Angel Investor Networks
If these potential sources have failed then you’re next step is to approach professional business angel networks or such whose sole purpose is to invest. Unless you are in the market for upwards of $1million then you can forget Venture Capital. (and as this website is about small business finance then we’ll assume you are not!)
When you are considering these Angel Investor networks, beware of lining consultants pockets with introducer fees or registration fees.
Before you part with your hard earned money, make sure you know what you are getting for it. Take references of successfully funded cases. Call the references, visit them, pick their brains, and in the final analysis don't be too disappointed if you get turned down. This type of fund raising is very difficult. However, having said that do not give up until you have overturned every single stone you can in your quest.
Good Luck!
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