Angel Investors.
Many small businesses looking for financial help from an “angel” often turn to individuals willing to invest in promising, start-up opportunities. Angel investors can be a good funding source to consider after you’ve tapped your friends and relatives. This approach requires very careful consideration since angels usually don’t write blank checks. A few terms that one should understand are:
- Liquidity; The ease with which an angel can readily expect their investment capital returned
- ROI; (Return On Investment), investors are interested in seeing their money grow (by a reasonable multiple) & with limited risk.
- Exit Strategy; they will want to see progress and a way to exit the deal down the line with meaningful profits.
One should presume that angel investors will do a lot of research and careful investigation into your business plan. BCBIZDEV can help tailor your business plan to outline the specific requirements usually sought in this targeted approach.
Always try to be very thoughtful when approaching potential investors. Resource investors, for example, are usually not interested in hearing about a textile manufacturer. A haphazard approach is likely to turn them off. Industry associations, local trade groups or, in some areas, business-incubator centers can help point to potential angels. There are many “meet-ups” or local business networking groups all over that can be explored for invaluable personal testimonials about the success & potential pitfalls to avoid.
Angel investors often invest through groups or networks. These provide due diligence, extra research, access to potential deals and shared expertise that one person operating alone generally doesn’t have. For instance, one member of an angel group might have background in a particular industry or the know-how to set up deal terms, sharing that knowledge with the other investors.
Angel investors are usually thorough, so don’t expect to get your money quickly. It could take several months to meet with different individuals or groups and answer all of their questions. (There are exceptions, including the case of Google, which got funding from an angel before its cofounders finished their presentation to him.)
Because they’ll own a part of your company, they will more than likely want a say in major decisions, and they’ll watch to see whether you listen to them. Don’t expect them to write a check and walk away. Many angel investors are former business owners who want to help people like themselves. They may be able to provide good advice based on their previous experiences.
Getting funding from angel investors isn’t easy, but it can be done if you take the right approach and are a good match with their individual interests. The benefits can far outweigh the money needed to simply grow your business. Their invaluable expertise both in business operations and even your industry niche any be worth infinitely more.
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