Raising finance through an angel investor
Starting a business with limited capital can be troublesome; luckily there are some affluent individuals out there who may be able to help. These individuals are known as angel investors and can have a very positive impact on early stage businesses, investing billions each year in new companies.
Angel investors are generally high net worth individuals who are passionate about business. They look to provide capital to businesses in exchange for an equity stake (shares) in the organisation. Angel investors have become notably popular amongst the younger generation, since TV shows such as Dragons Den which now features in various nations, including UK, Ireland and Canada.
What do angel investors want to see and know before they invest in my business?
Product / Service
- What is the idea, does it have USP?
- Will it work and sell?
- How much profit can be made and what are the revenue streams and major costs?
- Signs of market traction and good feedback from potential customers
- How much is it going to cost?
- What is the potential for growth?
- Who is your competition and why are you better?
- Is it scalable? What are the long term goals?
Person
- Confidence in your product or service
- Business acumen, polished presentation, right attitude
- Provide a clear business plan and explain how you wish to use the funds
- Do you have a good team and the right skills?
The deal
- Willingness to compromise equity
- Funding required
- Terms of the investment
- Why you need their help specially?
Benefits of angel investors
- Offer expertise and contacts as well as capital
- Can help you kick start and rapidly grow your business
- Angel investors typically offer between thousands of pounds to a million pounds in funding
- Willing to take a risk if necessary
- Become closely involved with the business to provide support
Negatives of angel investors
- May be difficult to find an angel investor who has had experience in your business market
- Will look to exit the business, in the form of an IPO or buy out, so angel investors will be less likely to invest if your business cannot display this kind of potential
- Angels can help shape the direction of your company, so if you want to keep control of its running’s you may want to consider an alternate method of funding
- The industry is very competitive, and so will take time to find investment. Decide whether the opportunity cost is worth it, and maybe bootstrap the idea at first as you will stand a better chance gaining an angel investor when you have a tried and tested product/service
