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Investment InformationIs it a bird...Is it a plane.....No it's an Angel Investor!
by:
Ryan M. Hoback
Look….up in the air...Is it a bird?...Is it a plane?...No, it’s an ANGEL INVESTOR!
Angel Investors (or just Angels) as defined by Wikipedia are affluent individuals who provide capital for business start-ups, ordinarily in exchange for an equity stake. Unlike venture capitalists, angels typically do not pool money in a professionally-managed fund. However, angel investors often organize themselves in angel networks or angel groups to share research and pool investment capital.
Before we start flying about in the air with these angels, let’s talk a minute just about capital phases. Capital phases are the stages that a business passes through ideally once
looking to generate “Early-stage / Pre-revenue” capital. The 1st section is the idea phase, wherever
typical of necessity
are technical development, market research, practicableness
analysis, and business planning. The sources of funding in this “Seed” stage are personal savings, grants, credit cards, and “family and friends”.
Before moving into the exploitation phase, we need to understand exactly what an angel capitalist
provides. Angel capital fills the gap in start-up funding between the "three F" (friends, family and fools) and venture capital. Most venture capital funds wish not consider investments under $1 million, spell it is difficult to raise much than $100,000 - $200,000 from friends and family. Thus, angel investment is a common second round of funding for high-growth start-ups.
Commercialization begins with a developed business plan, and progresses into the next phase once
revenue begins to flow in regularly. In the exploitation phase your goal is to get your product to the market. This means having an operation that is up and available to run swimmingly
and that has the ability to produce its product or service spell corporal punishment transactions as orders are received. The challenges that you face in this stage vary; your capital of necessity
now wish require outside capital to start, in addition you may still be in the pre-revenue phase which wish do attracting capital even as much difficult. Additional challenges may be no proof of market acceptance, banks won’t lend for this, SBA won’t lend for this, and venture capitalists are not interested either. This phase is what determines your market readiness. If you accomplish all your goals in this phase and reach a point wherever
revenues are flowing in, you can begin to come into the final stage, the growth stage.
The growth stage is once
your product or service has reached market acceptance. Once your product has been accepted by the market you begin to fall into a whole new realm of business operation and financing. By this point you may be self comfortable and an operation which no longer of necessity
to look for outside capital. This is the goal and this would-be be great! However, this likewise may be wherever
your operation begins to look for venture capital in the range of 25 million and up. We wish cover this in another article, in the near future. Right now, let’s jump back to talking just about the actual angel investor.
Angels are private investors with high net-worth that are authorized investors and are willing to do high-risk investments. They have had a flourishing business career; they are often retired business owners or executives who are looking for a "hobby", not just monetary system
return. Thus, aside from funds, angel investors can sometimes provide valuable management proposal
and important contacts. However, angel investments bear extremely high risk, and thus require a really high return on investment. Typical angel investments require a return of at least 15-20 times the innovational investment inside
5 years, as well as an exit strategy - plans for an IPO or an acquisition. Angel funding is thus one of the most dear sources of funds. However, cheaper sources of capital, such as bank financing, are not accessible for most early-stage ventures.
Angels understand that the capitalist
often gets burned, so they tend to favor markets they know. They ordinarily market validation and co-investors in order to feel comfortable.
Deal breakers are fairly simple once
meeting with investors. You want to do sure that you an up-beat positive attitude. A flourishing Angel capitalist
would-be hesitate to invest in causal agency with a poor attitude or negative mood. You want to do sure that you are not too inflexible, or arrogant. You want to be strong and creative in your pitch, embrace the passion you have for your product or service. However, do not create a sense of inflexibility in case the investors may be interested but have a slightly several outlook. This is a nice thing, this means they see potential and they would-be like to help do modifications to bring home the bacon a higher level of success. Another nice point to remember is the topic of exaggeration; most seasoned investors can tell once
inflated packaging is being adscititious to their investment salad. As presently
as they smell the pepper (an inflated pitch), they wish return the dish
and ne'er
order it again, so be realistic in your predictions and assumptions. One of the last points that I think is really crucial, is to understand that the founders must have several risk at stake in the investment. If an angel thinks that the founders are trying to cover their own backsides (in case of failure), this wish do them extremely reluctant to invest. So do sure you have a small but adequate stake in case of failure that is visible to those who are investing.
By now, you should have a nice grasp on what an Angel can do for you and your company. There are resources accessible for contacting Angel investors on the web and at http://www.motivatedentrepreneur.com/investor-alley.shtml. You should always approach business incubation specialists who are familiar with Angel investors and can help prepare and manual you through the process of meeting, qualifying for and finding funding. These professional have relationships with Angel networks, and they are really knowledgeable in the steps that need to be taken in order to obtain funding. If you ne'er
spread you wings and fly, you’ll ne'er
reach the sky!
© Copyright 2004-05 by www.motivatedentrepreneur.com
Just just about the author:
Ryan HOback is Presidnet and Founder of The Impelled Entrepreneur, Business Incubation Specialists and COnsultants
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