What an angel investor is looking for
Angel investors invest a significant amount of money every year, in to various businesses. However, attracting an angel investor can be a real challenge, for small business owners. The good news is that by knowing what angel investors are looking for, you can structure your company and your presentation, to gain their attention. Here is what you need to know about what an angel investor is looking for-
- Potential-Just like any other investor; an angel investor wants the assurance that they have the potential to make money. Generally, angel investors are looking to make a higher return then they could investing their money, in the stock market. If your company cannot provide the potential of that kind of return, it is unlikely that you will get investment money, from an angel investor.
- Solid management-Because most angel investors are previous business owners, they understand the importance of the management of a company. Angel investors are well aware of the fact, that they are not really investing in the products or services your company provides, but rather in the people who run the company. You will need to show any potential angel investor that the management of your company is made up of knowledgeable, competent and trustworthy people, if you want to have a chance of gaining angel investment money. The angel investor will also need to see that the management of your company has people who are skilled in marketing, sales, manufacturing, human resources and all aspects of business finances.
- Business plan-Forget the idea that you don't need a business plan. An angel investor, who is considering investing in your business, will want to see a well written and thought out business plan. Your business plan should be both complete and convincing. Your business plan should outline your plans, for your business and how you intend to get there. In addition, your business plan should include: financial projections, marketing plans, and marketing information. If you need help writing a business plan, you can find many sites online that will guide you through the process. For further help and guidance you can consult with your business attorney and/or financial professional.
- Involvement-Most angel investors will be looking for a business that they can be actively involved in. Because of this it is important to keep in mind that most angel investors, will want to put money into businesses that they are familiar with. They may even ask for a seat on your Board of Directors. Because of the close involvement that they will want to have with your business, most angel investors will only put money into businesses that are within close physical proximity. Finally, you should be aware that if you accept this kind of financing, you will need to be prepared to give up some control of your business.
- Readiness-Angel investors will want to see a business that is ready for investment. If your business is not at the stage to utilize investment money, then it is unlikely to attract the attention of an angel investor. Your business must be able to show that it can take the capital, use it to expand the company and increase the potential, for a return.
- Exit strategy-Many business owners are surprised to find out that most angel investors want to have an exit strategy, right from the start. Most angel investors are only looking, for an investment of about 5-7 years. This means that your business will need to be ready to show the potential, for that kind of profit. Most angel investors use a sale of shares to the principals in the company, as their exit strategy. You should not be surprised if your angel investor sets a time frame on their investment.