050-832 Business angels traditionally have been wealthy entrepreneurs (think Dragons' Den!) who provide capital in return for a proportion of your shares. Recently angel investing has changed with angels no longer operating as lone rangers, investing instead in syndicates to pool their resources, share deals, expertise and due diligence. One angel then generally takes the lead in ongoing relations with the investee business.
Your business/ your client's business should satisfy the following conditions to be suitable for investment:-
· There must be a willingness to sell a share of the business - raising equity will strengthen the balance sheet and may mean banks or other lenders may then be willing to provide additional debt finance. Valuation is a key consideration when agreeing the equity stakes, and can frequently be a sticking point between the entrepreneur and business angel.
· There should be openness to the idea of developing a working relationship with a business angel who will typically want hands-on involvement. They often strengthen the business by adding skills/ experience that aren't already there.
050-854 · The possibility of a high return should be on offer. This usually means an average annual return of 20% to 30% over the life of the investment. Most of this will be realised in capital gains over a 3 to 10 year timeframe.
· A strong understanding of the product and market must be demonstrated. A full business plan based on convincing market/ industry research and with financial projections is essential. This also explains how much money is being looked for and how this will be used.
· An experienced management team must be present who are committed to the business.
· An offer of an exit for the business angel should be available, even if the business angel has no plans to realise the investment by any particular date. The most common exits include a trade sale to another company or the company/company directors' repurchase of the business angel's shares at current market value.
050-864 Investments by business angels are comparatively informal and can often be found via your business network. The British Business Angels Association (BBAA) is the trade association and although it does not directly promote investment opportunities, it does signpost businesses looking for funding to appropriate business angel networks.
Just as an angel investor will carry out due diligence on their potential investment, make sure you do the same for them. Clearly a degree of personal chemistry is important to form a successful working relationship, but it is equally important to check the business angel's credentials. Look for evidence of previous success by contacting companies the angel has invested in. Also, confirm officially that the angel can provide the level of financing required to avoid wasting time with someone who has insufficient funds. Entrepreneurs may also want to consider putting into place patents to protect their ideas ahead of them sharing them with an angel.
Your business/ your client's business should satisfy the following conditions to be suitable for investment:-
· There must be a willingness to sell a share of the business - raising equity will strengthen the balance sheet and may mean banks or other lenders may then be willing to provide additional debt finance. Valuation is a key consideration when agreeing the equity stakes, and can frequently be a sticking point between the entrepreneur and business angel.
· There should be openness to the idea of developing a working relationship with a business angel who will typically want hands-on involvement. They often strengthen the business by adding skills/ experience that aren't already there.
050-854 · The possibility of a high return should be on offer. This usually means an average annual return of 20% to 30% over the life of the investment. Most of this will be realised in capital gains over a 3 to 10 year timeframe.
· A strong understanding of the product and market must be demonstrated. A full business plan based on convincing market/ industry research and with financial projections is essential. This also explains how much money is being looked for and how this will be used.
· An experienced management team must be present who are committed to the business.
· An offer of an exit for the business angel should be available, even if the business angel has no plans to realise the investment by any particular date. The most common exits include a trade sale to another company or the company/company directors' repurchase of the business angel's shares at current market value.
050-864 Investments by business angels are comparatively informal and can often be found via your business network. The British Business Angels Association (BBAA) is the trade association and although it does not directly promote investment opportunities, it does signpost businesses looking for funding to appropriate business angel networks.
Just as an angel investor will carry out due diligence on their potential investment, make sure you do the same for them. Clearly a degree of personal chemistry is important to form a successful working relationship, but it is equally important to check the business angel's credentials. Look for evidence of previous success by contacting companies the angel has invested in. Also, confirm officially that the angel can provide the level of financing required to avoid wasting time with someone who has insufficient funds. Entrepreneurs may also want to consider putting into place patents to protect their ideas ahead of them sharing them with an angel.
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