Need a Miracle For Your Business? Communicate With the Angels!
Warning – Never pay a “Business Angel” for the opportunity of making a pitch to them! Some unpleasant people have jumped on the bandwagon and are charging start-ups for the opportunity to showcase their business to a team of investors. This never happens in the legitimate world of enterprise.
Unless you have been living under a rock for the last few years you will have heard of Dragon’s Den, the TV programme where potential entrepreneurs present their business idea to a group of wealthy private investors who will then give them money in return for a share of their business.
This is exactly what Business Angels do in the real world outside of the pancake makeup and bright lights of The Den. They are normally wealthy people who have an interest in investing in companies. Often they have a particular area they are interested in, for example electronics, manufacturing, service sector etc and they will consider a business proposition that may be too risky for a mainstream lending source.
Business Angels bridge the gap between Venture Capitalists who deal in millions and really only want to work with BP and debt finance where you offer your first born child to the bank in exchange for an overdraft and get refused!
Getting sourcing from a Business Angel is tough. Most reject 90% of the proposals that are put to them and a further seven out of eight are rejected at the due diligence stage having been given the conditional nod at pitch stage. So the process is long and drawn out and many fail but the rewards are substantial for those who make it through the process.
Key Points about Business Angels
1. Just because they give money away doesn’t mean they are mad - yes, Business Angels will consider a proposition that a mainstream bank may turn down, this does not mean they will take on a completely bonkers idea with no thought behind it. If anything you need to produce an even more professional presentation when making a pitch to investors like this and you need to work hard to justify their input.
2. Do you homework - if an investor normally puts money into development of high end electronics for the health care field don’t bring them your proposal for starting a flower shop in Worthing.
3. Look for more than money - not all investors are looking for active involvement in a company, but some are, and these are going to be the most precious type of investor, especially if you lack experience in certain fields.
4. Negotiate - Dragon’s Den gives a very unrealistic vision of the world of Business Angels, people appear to hand over large lumps of their business with little thought and the investors demand unfeasibly high equity stakes. This is a negotiation and you are expected to be involved in a process of give and take.
5. Look local - most business angels operate within 100 miles of their home location, apart from those looking for technology companies who will expand the net considerably. So it’s pointless looking for angels countrywide when the person who will invest in you may be on your doorstep. Equally, you don’t have to look for an investor with a up front Business Angel label on his lapel, you can treat any wealthy businessperson as a potential angel if you approach them in the right way.
Personally I don’t think it is worth approaching Angels with a mainstream proposition such as your desire to set up a shop or an art gallery or a hairdresser or a motor mechanics. They are looking for the more esoteric, and the businesses with the potential to make a very great deal of money. Primarily they want medium risk, high return and the fields of innovations in technology, anything medical related, anything with a strong franchise opportunity and anything with potential to fill a global niche is the kind of project to consider for Angel financing.
I’m always happy to consider proposals myself as I have been known to put my hand in my pocket occasionally, but be warned, I make Duncan Ballantyne look friendly, although I am prettier. Jo W Barnes