Looking For Angel Investors

 

Looking for Angel Investors can be a difficult process as you need to find an individual that is suitable to provide the capital that you business needs. It should be immediately noted that most angel investors do not provide loans to entrepreneurs that they work with in regards to developing a new enterprise. In most instances, when you are looking for angel investors you should be prepared to give up a significant portion of your business’ equity to this third party. In some instances, especially for highly lucrative businesses, you may be able to negotiate a hybrid investment into your business. In regards to this type of investment, which is becoming popular among angel investors, you sell a smaller part of your equity while concurrently taking on a business loan (from the angel investor) that you make monthly payments on. This ensures that the angel investor receives some form of capital return while their equity position in the business appreciates. For the angel investor, this produces significantly less risk than making solely an equity investment in your business. This should be one of the potential situations that you should consider when looking for angel investors.

 

Angel investors differ from venture capitalists in that they are typically individuals or small groups of individuals that work together to provide financing to startups and existing businesses. One of the common plusses about angel investors is that they are willing to take less return that their venture capital counterparts. However, while angel investors are willing to take smaller equity percentages of companies they are still going to want a significant amount of oversight when it comes to your business’ operations. Additionally, it is not always the case that angel investors want less of your business in regards to equity percentages. In some instances, especially when the risk is high, angel investors may seek the same equity percentage as any venture capital firm.

 

The process of looking for angel investors usually involves first going onto the internet. There are many local associations of angel investors that register with online portals so that they can more easily connect with businesses within their area that are seeking angel investment. However, do not provide a potential angel investor with an undue amount of information regarding your business prior to having a confidentiality agreement in place.

 

Additionally, when looking for angel investors or working with an angel investor then you should always have an attorney and a certified public accountant in place to assist you with the closing process. In this process, your attorney will assist you with negotiating the terms of the agreement, the equity percentage provided to the angel investor, and the operating agreement for your company. Your certified public accountant will assist you with in determining the fair valuation of the offer between you and the angel investor. They will also assist you in reviewing documentation that creates the agreement between you and an angel investor. In some instances, when looking for angel investors, you may be required to have a private placement memorandum in place. This legal document has a very specific format and showcases the risks associated with the business, showcases your business plan, and explains the terms that are being offered to an angel investor. You may need this document if you require a substantial number of investors for your business. On a qualified attorney that has a significant experience with business matters or securities law can make the determination for you as to whether or not you will be required to have a private placement memorandum.

 

One of the other benefits of working with angel investors is that they can usually provide you with a significant amount of advice when it comes to the operations of your business. This is especially true if the angel investor has relevant experience in your industry. In many instances, the angel investor will have prior experience in the business that you are operating. This is primarily due to the fact that most angel investors seek to direct their funds into businesses that they understand. Their advice is often coupled with the oversight of business as your grow and expand your company.

 

In short, working with angel investors can be an excellent method of obtaining the financing that you need in order to develop or expand your business operations. They are more willing to work with you than a venture capitalist, they can act as a mentor for the business, and they can potentially assist you with additional rounds of capital if your business expands rapidly and needs further capital to fuel the expansion of your business. Again, unlike traditional bank financing, you will be required to provide equity to your angel investor – but it might well be worth it if you are having trouble securing debt financing.