How to raise capital from angel investors.
If you're ready to grow your business and seek funding from Angel investors (Angels), it's important to be prepared before you start approaching them.
Who is an Angel investor?
Angels are successful entrepreneurs looking to invest funds in an innovative/start-up business where they can contribute their skills. They tend to look for investment opportunities at earlier stages in the life of a business, and provide capital through a loan or paying cash for part ownership in a business.
Lots of businesses approach Angels and they can't invest in them all, so they will likely have investment criteria. They generally invest in businesses they know or can easily understand.
What angels want?
Angels will want to see that you understand your industry, your business, your product/service, and your market, and that you have relevant experience. They'll also want to know about your finances, management team, working style, business plan, and if you're prepared to invest your own money in the business.
They want a return on investment so they'll ask you detailed questions to find out any risks involved and assess if they want to invest in your business.
Consider the following areas and be ready to discuss them in detail.
Is there a market for your product and does the market want what you are offering? How big is the potential market? Do you have a niche product? Be prepared to state how you can capture a worthwhile share of the market and how you'd access export markets if required. We have in-depth market knowledge and expertise across a range of industries and sectors, so we can help you assess your market so you can face questioning from Angels.
What is your business valued at? Valuing your own business is difficult so make sure you talk to experts about this. We have performed valuations of businesses across many industries and can provide valuation support and guidance.
Are your financial projections realistic? Make sure you accurately assess the amount you need. Be ready to discuss this and what you will do with it, what you might need in the future, when you will start making a profit, and how the Angel will get a return on their investment. Be able to talk about product ideas for the future, to show that your business has plans for the future. Angels can see single-product businesses as a risk.
Competitors and product protection
Understand your competitors and their products. Be prepared to outline why you are different and what you can do better than them. Think about how you will protect your product through patents, trade secrets, and proprietary technological developments.
Working style and management team
How well do you and your management team work alongside others? Angels will assess how they could work with you. They'll also want to know how you'll develop yourself and/or your management team as your business grows. They may want to visit your business to see how employees interact.
Regulations and laws
Research and understand any current/upcoming regulations and laws you'll need to comply with in New Zealand and those countries you plan to export to. Consult a lawyer if required. This reassures Angels that you know all the regulatory and legal requirements, before they get involved.
Think about how you want to structure the deal and get advice from an accountant. For example, Angels will want to know if you want to exchange part ownership of your business for cash, if you want a loan, or a mix of these two things. Be prepared to take a lower investment than you wanted, if required. Remember that it's not just the investment you'll be getting from the Angel - they'll be bringing valuable and in-depth experience, vision, and connections to your business.
Things you should know.
The material on this webpage is provided for information purposes only and is not a recommendation or opinion.
The material on this webpage is does not take your particular financial situation or goals into account. We recommend you seek independent legal, financial and/or tax advice.