The Dirt on Angels…Digging for Investment Money

 

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On the heels of Global Business Angels Day (Global Entrepreneurship week) let’s talk some basics when it comes to understanding Angels.

An Angel is a high-net worth individual who invests directly into promising new product opportunities in return for an interest in the business. In addition to financial capital, Angels may mentor and coach the entrepreneur, which often leads to healthier growth opportunities. As an established business person in the Peace Region I’d like to help potential entrepreneurs and SME’s understand some of the characteristics that could be investigated when considering a business relationship.

Let’s take a look at a few.

There is an old saying in investing, particularly in start-ups; “give me an A team with a B product rather than a B team with an A product.” What this means is good management is very important. Just because you have a great product doesn’t mean it will be successful without good management. As Angels we look very closely at who will be managing and what experience and skill sets they have. Angels quite often bring their skills, experience and connections to bear as well.

This leads to another observation.

Is the person coachable? If you are head strong without a proven management background are you prepared to take direction? If you don’t have proven management skills, be ready to give up more equity in your ask.

What is your credit history? If you can’t manage your money it is doubtful an Angel would trust you to manage hers/his. This again could lead to the Angel wanting a controlling interest until you have proven yourself.

What competitors are out there? You must know that and the market size.

Watch the popular television programs eg. “Dragon’s Den” and “Shark Tank”…several episodes. Note that the first thing after introduction is what they are asking for and what they are willing to give up. Don’t be ambiguous. Also understand that many of the handshakes on those shows do not necessarily turn into deals, subsequent due diligence often turns up issues that weren’t discussed in the brief 10 minute television presentation.

The value of the Angels’ experience quite often exceeds the value of the money they put in.  Use that experience!

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