Private investors, more fetchingly dubbed business angels, account for £800m to £1bn of early-stage investment each year. Dragons' Den might have raised public consciousness of angels but they remain elusive. So how do you find the invisible man?
Don't start your search looking for any investor, begin by looking for the perfect angel. Want to know who invests in companies just like yours and has the expertise you're looking for? Look at businesses like yours. Search private equity websites, trade mags, financial papers, and competitors' sites to discover where investment in your sector and stage of growth is coming from. Take note of investors you want to explore further and founders/MDs of companies to contact - their insights will be invaluable.
Investors are constantly looking for the next big thing, the
start-up creating a buzz, right? Be where they're looking. Get to
the events your target angels attend and where you know other
investment-ready companies or investor-connected MDs hang out. Ask
for attendee lists in advance so you know who to speak with.
Note of caution: that doesn't mean turn into Mr & Mrs Party Animal 2010. No-one invests in a drunk. Neither does it mean reeling off your pitch the minute you shake hands. Avoid hard-sell, but talk passionately about your business and who you're looking to meet. Angels don't back ideas, they back people. Relax and be yourself. Always follow up the next day via email or social media.
Business Angel Association (BBAA) might sound stuffy but you'll
soon realise angels don't fly solo. They know each other, they talk
and typically they'll share investments to minimise risk. Angels
often make local investments and the BBAA will immediately refer
you to your regional chapter. All BBAA associations and investors
adhere to a code of conduct. There are 22 registered business angel
networks and 20 early-stage VC funds.
Regional networks' fees and ways of operating vary. Usually they'll vet a business plan for a cost and present it to their registered angels. They then take a commission (around 5%) on any completed deals.
Angels Den is proving an exciting alternative. It's an online pitching and matching service which now boasts in excess of registered 2,500 angels. It charges £499 to get your idea in front of one of its angels and takes 5% of any deal secured. It claims a fifth of the people using its service have found backers.
Angels Den was formed out of the frustration of its founder Bill Morrow: his inability to secure funding for a previous idea despite having spent £15,000 joining other networks. See point five for advice on matchmakers that can't demonstrate previous success and, more pertinently, guarantees on exactly who and how many people they're pitching you to.
Events focussed on matching investment-seekers with investors
are on the increase. While each has its niche, they essentially
work around the established OpenCoffee model of paying a fee up
front - typically £350-500 - to pitch your idea to a crowd of
Some are better than others and our advice would be to find out as much as you can about the calibre and backgrounds of the attending investors before shelling out. Also look for events focussed on your sector.
Angels Den runs SpeedFunding events and charges £249 per person for pitches to between 10 and 20 angels. You'd also pay them 5% of any funds raised. CmyPitch, a site where you upload video pitches, also runs events called CmyPitchLive. They're £300 plus 5% of completed deals.
Networking hard for an investor will guarantee you one thing: at least one person will offer to find investment for you for a bounty. It's usually a slice or a one-off fee, or sometimes both. They're sharks. Be warned: it can be 5% for an intro to an angel network, who'll also want 5%, or 10% for completing a deal on their own. Add in legal fees and suddenly the money you get your hands on looks a lot more expensive than when you started out.
Make sure you're not paying for contacts you could make yourself with a bit of digging around.
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