Welcome to Business Angel Investors
How do Business Angels Work?
Business angel investors can work however they like - it's their money after all! With them being independent investors using their own personal money you will find that they will work much in their own personal way.
However, that said, they will all want to follow a process for examining and reviewing your business to find out if the investment will suit them and your company.
Agreeing an investment with a business angel
- You make initial contact with the business angel investor and start some informal dialogue to find out if they would be interested in the idea of investing in a company like yours.
- You submit to them a formal application and/or business plan.
- If the business angel feels there may be potential for an agreement a business meeting will be arranged for you to discuss matters further or you may be asked to do a formal pitch or presentation about your business.
- If both parties agree to go ahead there will then be a period of due diligence during which the business angel will want to see detailed records of your business. He may also want time to discuss the records with his advisors (for example his accountant).
- Assuming due diligence does not reveal any problems, contracts can be drawn up by solicitors and money paid upon signing.
As part of the process, do ensure that you do your own due diligence - find out as much as you can about the angel investor to make sure he/she will be suitable to work with your company.
Business angels will normally offer their time and expertise as well as their money and may serve on your board of directors or become part of your management team. They will want a fair amount of equity in return for the investment - generally between 10% and 50% of your company.
Business angels need to have an exit strategy, so show them how they can realise profits on their investment, even in the event of liquidation. Exit may be in the form of a public offering or buyout from a larger firm.
If you don't get the investment you are after
You may find that, following a pitch or presentation, you don't get the investment you were after. However, the process can still be very worthwhile for getting feedback and ideas about your company and finding out if there are any major flaws in your business plan. It will also provide you with good practice for making a presentation.
You may find that the angel can refer you to other potential investors, or he may be interested in being involved in your company but not for full amount, and may introduce other investors to work alongside him.