How to Get a Business Angel to Invest in Your Business
Finding a private investor, or 'angel,' that's interested in investing in your business is just the beginning of the investment process. You then have to convince the angel to seal the deal. So what are angels looking for when they peer down on the entrepreneurial community?
Strong leadership
Even if your company is a start-up or early-stage company without a management team in place, an angel will look for leadership ability, and ideally a CEO with a track record in the market they're going after.
A unique product offering
This means there isn't a product like it on the market ? it's unique in its industry ? or that it complements something that's already in the marketplace. There should be few or no competitors.
Lead-time to market
Entrepreneurs need to show angels they have time to get their product on the market and still gain a leadership position. For example, lead-time should include the time required to get a patent.
Proximity to home
An angel looks for businesses that are physically close to their home base. "An angel wants to be nearby so they can drive over to talk to the principals," says Jim Orgill, managing director of advanced technologies for the Business Development Bank of Canada.
An exciting prospect
Retirees with money to invest can be your godsend, particularly if they have experience in your industry. "They're looking for a bit of excitement: a business they think will grow and be exciting," Orgill says.
A good financial investment
Of course, angels are also looking for a good return on their investment. This means better than they would make on the stock market.
An exit timeframe
An angel always looks for an out. An angel will look to get out of an investment in three to five years time, which matches companies seeking equity with private investors. After that time, an angel would expect the company to be self-sufficient, or to be looking for further financing from a venture capital firm.
A significant reason to invest
Companies that successfully land angel investors include start-ups that have incubated long enough to develop a market. Others may be older companies that have proven themselves and are looking to expand their markets, or need funding to further their research and development of existing products.
The investor relationship
Before you finalize a deal with an angel, be sure to contemplate what the investment will mean to your company.
Be realistic about how much control you want ? and how much of that control you're willing to give to your angel investor. In return for their financial risk, an angel reserves the right to supervise the company's management practices. This usually means they hold a seat on the board of directors and receive an assurance of transparency.
Be sure the angel has made a reasonable assessment of your company. The investor should understand the direction and vision of your company, and should be willing to protect its value. That means evaluating your company's worth before you begin the search for an investor to ensure your angel will have a fair estimation of the value of your company.
If you are interested in discussing raising equity for your limited company and have been trading for over two years, contact Eibhlin Curley, ecurley@dceb.ie
https://www.businessangels.ie/ is the website for the Halo Business Angel Network
Adapted from an article on www.visa.ca website