What role would you like to see an Angel investor play in your company?
By Venture Giants
It's important to consider the fact that most angel investors prefer to invest in industries that they have considerable knowledge and experience in. Also note that angel investors improve their value to the companies they invest with when they participate beyond just the financing.
Angel Investors who interacted with their invested companies at least a couple of times a month experienced greater results. Interaction could be in the form of mentoring, coaching, overseeing and monitoring performance as well as providing leads.
If you would like your angel investor to play the simple role of only being employed by the company, or are looking for cash investment only, than this is a part of your investment proposal that requires additional consideration on your part.
Remember that your potential angel investor will want to do everything that he or she can to help you succeed in your entrepreneurial efforts. Angel Investors are usually also associated with an amazing network of successful colleagues who are also a tremendous resource. Don't discount an angel's willingness to share their considerable knowledge and expertise in every aspect that an entrepreneur will experience. This applies to your industry, your market, the technology and even distribution channels and can be a great resource if used wisely.
Another further consideration is to ensure whether it is actually legal for an Angel investor to be a director of the company within the meaning of section 230 of the Employment Rights Act 1996 (ERA). The article Is a Director an Employee? popup window actually explores this topic very thoroughly with a real case as a point of reference.
Angel investors often become investors by virtue of having success within particular industries. You want their cash investment but finding an angel with key industry knowledge and contacts can open doors and greatly accelerate your company's growth.
Therefore as an entrepreneur your preference should be towards an angel investor - in addition to cash - accepting a seat on the board of your company, or providing specific industry knowledge and leads for your business or even him or her providing you with an active mentoring role.
Sometimes these active angel investor roles can be far more valuable than the cash investment itself, and this is something that must always be considered in the ensuing negotiations for angel investment vs. equity.
A good way to ensure you are getting good angel investment terms with your your investor is to seriously look at the amount of angel investment you are trying to raise. Do you really need that much? Trim it down your requirements if you can. Calculating the amount of angel funding that you ACTUALLY need is one of the most important steps in this process - too little and you are undercapitalised - too much and you could look opportunistic. How much Angel Investment Capital do you actually need? explores how to balance out the amount of Angel Funding with the amount of equity that you are willing to give in exchange for it.
If you can not trim down the amount of angel capital you are seeking, the next step is to look seriously at a realistic market value of your business idea before even considering entering into any kind of negotiation with a business angel investor. Inside Business Angel negotiations: Valuing your Seed or early-stage business correctly! looks into how a business angel investor will view your investment opportunity!
And finally as most angel investors will prefer to invest in industries that they have considerable knowledge and experience in, you will find that your chances of raising angel investment will increase considerably if you highlight how experienced your management team is. Remember, an Angel Investor is also investing in the people who will lead your business forward, and if you have a team in place that can instil confidence into an angel investor that you have what it takes to run the business, and that you have the leadership with sufficient knowledge and understanding of both the business and the overall industry - you may well find that this is a significant point in your negotiation that can get you a better angel investment deal. Picking the right Management team explores how you can present your management team to an Angel Investor.
Venture Giants is a premier UK business Angel investment network and small to mid sized business networking portal that matches active business angel investors with entrepreneurs' seeking investment capital and business funding.
Written for and behalf of Venture Giants Enterprises Ltd. All rights reserved 2009
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