When you are getting ready to launch your business, you will need many things in place. One of the most important pieces is financing. Most entrepreneurs have already borrowed funds from friends and family, and may have a small amount of financing from a financial institution as well as their own hard earned money.
Angel investors are wealthy individuals who are also savvy business people themselves with vast experience and a wide variety of backgrounds. If you are looking for angel investors for your business venture, then you need to have a solid plan in place. Angel investors are willing to invest money into your business in exchange for a share of the profits or a portion of your company. How do you prepare for angel investing?
1. Prepare a solid business plan. Your business plan should be professionally written with a solid direction and your vision for the company. Your business plan should include a snapshot of your target market, how much money you plan to spend to get your business going, how that money will be invested and what the eventual return should be (and when you expect to see those returns).
2. Structure your company in such a way that angel investors can obtain certain shares in exchange for their investment. You will want to have a shareholder agreement prepared ahead of time so that you can offer a certain amount of shares in return for the investment.
3. Have a solid exit strategy in place. While an angel investor wants to invest in your company, they also want a solid timeline and an estimate of when they will be able to see a return on their money. Just because an investor wants to invest with you does not mean that they want to stay involved in your business indefinitely. Always consider the needs of your investors, they may want to free up some or all of their investment down the road so that they are able to invest with other businesses.
4. Expect that your angel investor will want to have a say in your business. Many angel investors are experienced business professionals who want to play an active part in the direction of your business. They may wish to be present at any board meetings, to be a mentor and to provide business advice to you. You cannot expect to take an investor’s money and not provide them with something in return. This is a small sacrifice to be made in order to get the capital and the investment that you need to get your business off the ground.
5. To look for suitable angel investors, you can start with our list of Angel Investors here.
Angel investors are experienced business people who do have some good advice for you as well as knowledge to bring to your business. This can help you to be successful where other new business start-ups might fail. Starting a business takes a great deal of planning, time, effort and, of course, money. If you do not have all of the pieces in place, you may be setting yourself up for failure.
Source: About.com Small Business: Canada