Finding an Angel Investor in a Day. Joseph R Bell
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Название: Finding an Angel Investor in a Day

Автор: Joseph R Bell

Издательство: Ingram

Жанр: Малый бизнес

Серия:

isbn: 9781933895680

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СКАЧАТЬ have a compelling business plan.

       You have a business concept with very high growth potential—enough not only to sustain the business but also to produce substantial profits for investors.

       You have a product or service that is developed or near completion.

       You have exhausted other funding sources, such as personal savings, credit cards, a mortgage on your home, and funds from friends and family.

       You don’t want to incur further debt (by re-mortgaging your house, for instance).

      QUICKTIP

      Money from Family and Friends

      If your wealthy father-in-law or best friend wants to invest in your start-up, it’s tempting to accept this readily available capital. But think carefully before you accept money from friends or family, especially if you also have the potential to raise money from outside angel investors. Not only may holiday dinners become very awkward if they lose their money, but having many small investors early in your company’s development can complicate later deals if you seek outside investors.

      What Do Angels Invest In?

      Angels invest in a broad array of businesses, from technology to medical equipment to software companies to business-to-business firms to online retail to restaurants to enterprises selling new inventions. In fact, angels invest in virtually every kind of business—as long as there’s a potential for significant financial returns. So whether you are the president of a technology start-up in New Jersey or an entrepreneur in Idaho with a smart idea for a new piece of farming equipment, there’s likely to be an angel investor in your backyard.

      Angel investors are interested in businesses that have the potential for substantial growth and are likely to produce hefty profit margins or to be an acquisition target within a few years. Because of this, industries with high growth potential have attracted the most angel investment. The chart on page 10 shows which industry sectors attracted the most angel investment in the U.S. in 2005.

      Since many angels made their money in high technology, and technology-based businesses have shown fast growth and rapid returns, a large percentage of angels are attracted to businesses that include a technological component in their concept or operation.

       Share of Angel Investment in the U.S. by Sector, 2005

SECTOR PERCENTAGE OF OVERALL ANGEL INVESTMENT
Healthcare services/medical devices and equipment 20%
Software 18%
Biotechnology 12%
Electronics/Hardware 8%
Media 6%
Industrial/Energy 6%
IT 6%

      Source: Jeffrey E. Sohl, University of New Hampshire, Center for Venture Research

      4. What’s an angel group?

      QUICKTIP

      Your Angel Is Close By

      It used to be that angels would only invest in businesses that were no more than half a day’s drive from their home. Angels like to be close to their investments; they want to be involved in business decisions and stay abreast of company developments. Today, sophisticated angels will take a short plane ride for the right investment opportunity, but most investments are still made locally.

      When angels join forces and combine their investment dollars, they are known as an angel group (or network). These groups review new business opportunities and invest collectively as a unit or, more typically, as individuals. In 2005 there were more than 250 well-established angel groups across the United States, with an average membership of forty-one individual investors.

      The majority of angel groups hold regular meetings, often monthly lunches. Most bring together investors to hear entrepreneurs present their business ideas. Members of the group then discuss the merits of the business concept, giving feedback and suggestions. Then individual investors decide whether or not they want to invest their own money in the venture.

      Most angel groups have established application procedures—some are stricter and more formal than others. Some groups have websites spelling out their application and presentation processes. Others require a member of the group to sponsor you if you want to apply or make a presentation.

      Individual members of the group may have responsibility for screening entrepreneurs and business plans before they are presented to the entire group. The Rockies Venture Club, based in Denver, Colorado, does screening in this way. In the case of other groups, a professional manager is hired to screen applications from entrepreneurs. And then there are groups like the Boston-based Common Angels, which has a professionally managed fund and a full-time, dedicated staff.

      A few groups work more like venture capital firms by pooling members’ funds or even raising money, which they then use to invest collectively in business opportunities, rather than having each member of the group decide whether they want to invest individually (a much more common approach).

      Angel networks like to receive business plans and applications, especially from promising companies. They believe that the more investment opportunities they see, the more potential there is to find high-quality deals (this is referred to as quality deal flow). The New York Angels, for example, receives thousands of applications for funds each year. Of those, approximately three companies are invited to present to the group’s members every month.

      Working with an angel investor group, rather than an individual investor, presents both advantages and disadvantages. An angel group has more capital to invest, so if you need to raise a lot of money (more than $100,000 or so), you may be better off approaching a group instead of an individual investor.

      Angel groups have more collective investment experience, and they are concerned about their reputation in the entrepreneurial community (to ensure quality deal flow). So they are likely to offer you a fair, if not always the most competitive, deal. On the other hand, an angel group may use its clout to negotiate terms that are tougher for you than a solo angel would.

      You may also find it more difficult to form a strong personal connection СКАЧАТЬ