Raising finance from business angels

If you're trying to secure finance for your business, why not get help and advice from more experienced business people while you're at it. Business angels do just that: they invest in your business while mentoring and helping you to grow at the same time.

What is a business angel?

  • In a nutshell, a business angel is an individual - often one who runs or has previously run their own business - who has funds to invest in a business.
  • They often invest in more than one business so choose your angel carefully to ensure they're not too thinly spread.
  • In return for their investment and time, they'll take a share of your business

What can a business angel offer?

  • Business angels aren't right for you if you're looking for a multi-million pound investment. Typically, they set their maximum investment at around £750,000.
  • Minimum investment starts at around £10,000.
  • Doing a deal with a business angel isn't just about financial gain: the can also offer great insight into how to run a business; offer you their skills; and share their contacts
  • Find out how well connected your angel is and whether they have experience in your sector

How to find an angel

  • Business angels aren't as hard to find as it might seem.
  • The trick is finding the right one for you and your business: look for an angel that has similar interests
  • Research your angel: what have they invested in before?
  • Log on to the British Business Angel Association (BBAA) - it lists members according to location and allows you to find out more about them.

What angels look for

  • Business angels will expect a polished and almost finished article: you are approaching them to raise finance, not to decide on a plan for you
  • Angles often invest in business teams with a strong USP.
  • They expect the business to succeed, as they want to make a return.

How to pitch to an angel

  • While pitching to a business angel, you'll need to believe in your business more than you ever have before: sell it to them so they invest in yours over others
  • Enthusiasm and a belief that your business is going to succeed is essential: be confident when speaking with an angel. It will impress them.
  • Make sure you have answered any query an angel has. They will think twice if you appear to have the slightest doubt.
  • It's important to remain level-headed. You'll be talking facts, figures and projections, so make sure you know them inside out: a slight stumble could put an angel off investing.

Agreeing a deal

  • Before you get a contract drawn up, hammer out the terms of the deal
  • The deal may not be purely financial: it could include details about the amount of time an angel will spend nurturing your business.
  • Make sure you're clear about the level of investment, share of equity and other terms
  • Don't be scared to negotiate. It will show the angel you possess this skill to use with others
  • Get legal advice before signing on the dotted line
  • Don't sign unless you're completely happy. You're giving away a slice of your business. If the first angel isn't perfect, there's probably one out there who is.

Checklist

  • Determine how much money you need; then work out how much of the business you're willing to offer to secure it
  • Make sure the plans you have for your business are realistic
  • Ensure you business is ready for external investment
  • If you are going forward for angel investment, it is a good idea to seek advice from a business adviser and a lawyer

FAQ

Where can I find angel investors?
Networking is a good way to find potential angel investors: attend events sponsored by your local Business Link and chamber of commerce. Speed-pitching events and online matching services are worth a look too. Speak to friends and business associates about your venture, too - word of mouth can spark investors' interest and create a buzz around your company. Associations such as the British Business Angels Association can help connect you with interested parties.

Are there alternatives to angel investment?
Yes; and depending on your circumstances, angel investment may not be the most appropriate choice. Venture capital; loans; mortgages and overdrafts are all avenues worth exploring. Government grants are another route worth considering.

Jargon buster

Risk capital: another term for equity investment

Resources

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