Finding an Angel Investor in a Day. Joseph R Bell
Чтение книги онлайн.
Читать онлайн книгу Finding an Angel Investor in a Day - Joseph R Bell страница 6
Название: Finding an Angel Investor in a Day
Автор: Joseph R Bell
Издательство: Ingram
Жанр: Малый бизнес
isbn: 9781933895680
isbn:
Because angels are investors, not lenders, if a company fails, the entrepreneur does not need to repay the money. Since most new businesses are somewhat risky, not having to pay back the money if things don’t work out is a very appealing concept for an entrepreneur. But angels know that new businesses are risky too, so before they invest, they’ll want to know exactly how you plan to use their money in order to make your company grow. You’ll need to show them a strong business plan, realistic financials, and a capable team. And after they invest, angels expect regular reports on the company’s progress, as well as the chance to give their own input into how the business is run.
If a company succeeds, the angel investor gets a piece of its profits, a portion of the sale price of the company, and/or shares in the company if it should eventually go public on a stock exchange. As part owner of the company, the angel investor also acquires certain legal rights.
Typically, angels invest from $25,000 to $2,000,000 of their own money. But the best angel investors supply much more than cash. They also offer:
Business knowledge. Angels often have many years’ experience running and investing in companies. As the founder of a new company, you’ll benefit from their business acumen. Use their expertise to fill in your knowledge base or the skill set of your management team.
Industry expertise. In many cases, you’re likely to find an angel in the same industry as your new business. They’ll almost certainly have many years of experience, contacts, and a sound working understanding of how things really work in that industry.
Contacts. Not only do angel investors provide advice, they also provide introductions. Their network will become your network. They can lead you to potential customers, suppliers, lenders, and key employees.
Support. Angels are on your side. They want your business to succeed. And it’s not just because they stand to gain financially from your success—angels take pleasure in seeing entrepreneurs and businesses flourish. Whether they are semi-retired, invest occasionally, or invest as a full-time profession, a good angel will make the time to support you and your business with technical knowledge, practical experience, and business advice.
Follow-on financing. Angel investors can support your future fundraising efforts either by investing more of their own money or by helping you find additional angels or other sources of capital.
2. Why angels invest
QUICKTIP
Bragging Rights
Some businesses are particularly “sexy” to investors. Angels who get involved in interesting companies—a restaurant, a winery, a minor-league sports team—will have a built-in conversation topic at cocktail parties and dinners with friends and business associates. They’ll also have their eye on the perks—the best table in “their” restaurant, the owners’ box at the game, or their name on the label of a good Pinot Noir!
The primary reason angel investors invest in entrepreneurial businesses is to make money. They will evaluate any business proposal first and foremost on financial criteria. Generally, they must feel confident that they will see a higher rate of return on their money by investing in your company than by investing in less risky alternatives, such as stocks and bonds. But other factors motivate angel investors as well, including:
The thrill of entrepreneurship. Many angels are former entrepreneurs, and they enjoy participating in the launch of a successful company, the competitive nature of business, and the challenge of the marketplace.
A desire to support their community. Angels want to contribute to the growth of the local economy. They recognize that new businesses—their investments—have a positive impact on the community by creating new jobs and revitalizing industries.
The search for a balanced investment portfolio. Angels are high-net-worth individuals and generally have other investments, such as real estate, stocks, and bonds. They may be motivated to invest in high-growth, high-risk new companies to diversify their portfolios.
The need to be engaged. For angels who are retired or semi-retired, investing in young businesses is a method of staying involved in the business community in an interesting way that suits their lifestyle.
A wish to keep learning. Angel investors tend to be intellectually curious. Being involved with new companies enables them to continue to learn and acquire knowledge about business and industry.
3. What’s an angel investor?
QUICKTIP
What’s in a Name?
The term angel investor originated in the early twentieth century and referred to people who invested in Broadway shows, seeking a little glamour in their lives, along with a return on their investment—think The Producers, but the scrupulous version.
Angel investors are individuals or groups of individuals who invest their own money in a new business. It is important to distinguish them from other types of investors, such as venture capitalists (see pages 15-18), who invest other people’s money.
Angels provide funds for promising businesses, generally in the early stages of development. They typically invest at least $25,000, and sometimes much more, in fledging enterprises. Of course, others may also invest in your business—a rich friend or relative, for instance, may invest $5,000 or $10,000 to help you pursue your dream. But generally, these are not considered to be angel investors because their primary motive may not be a return on their financial investment.
Angel investors expect to realize a significant—and relatively rapid—return on their investment. In return for their money, angels take partial ownership, or equity, of your company. Money from angels is not a loan. It does not need to be repaid if the business fails. Instead, angels will make their money back, ideally with substantial profits, when you sell the business, go public, merge with another company, or provide another way for them to take their money out (that is, a liquidity event). In some cases, angels may receive a piece of ongoing operating profits.
Because angels expect a dramatic return in a relatively short period of time, they look for:
Businesses in high-growth markets
A true competitive edge
A proven management team
A clear exit strategy—a plan for how the entrepreneur, management team, employees, and investors will realize their profit
Companies whose value will be increased by the addition of their money
Evidence of founder’s investment in, and commitment to, the company
The Right Time to Seek an Angel Investor Is When:
You are willing to give up some ownership of your company.
You СКАЧАТЬ