I’ve tried a bank loan but have been unsuccessful and am now looking to find a private investor but don’t really know where to start. What networks and channels can I go through to meet the kind of people willing to part with cash for a share of my business?
It looks like a lean time for businesses looking for affordable loans from the banks right now, so it’s no surprise that people are having to consider the alternatives.
The business angel is an interesting potential source of cash. In the UK there
is an outstanding cadre of very high net worth individuals who have created great personal wealth through entrepreneurship. It’s these individuals who are prepared to invest substantial sums in other businesses and back the next generation of entrepreneurs. In doing so, they are creating a virtuous circle of entrepreneurship the sort of which has previously only been seen in the
But where to find them? First of all, make sure you are working your existing networks hard – both business and personal. Ensure that everyone knows about your business; its potential and the kind of money you’re looking for.
Secondly, use the increasing number of angel investment clubs that are looking to match angel funds with potential start-ups. Search online for both national and local clubs and you’ll find names such as Angel Investment Network, London Business Angels and Angels Den. They offer an efficient range of methods to get your business in front of potential investors – from online matching, to video pitching and face-to-face speed-pitching events. Specialist investment and advisory firms dedicated to supporting entrepreneurs - such as Ariadne Capital - can also introduce you to potential angel investors and help you make your case when you meet them.
The key is to find the right investor for you and your business and that means finding an angel who is passionate about the sector in which you’re working. They will not only give you financial support, but can also play an active role in ensuring your business is as successful as it can possibly be. They can both offer the sort of input that can be vital for a growing business that alternative methods of financing just won't deliver. They also have the benefit of quicker investment decisions!
There are, however, a range of issues that a company considering business angel involvement should think about and the business owner needs to be very clear on what they are prepared to give as part of the business angel package: Issues such as information rights; board representation; shareholding dilution and exit strategy - these considerations should not be taken lightly.
My experience is that handing over some control can be beneficial if your business considers the value and power of an angel as mentor as well as financial supporter. I counted Charles Dunstone of Carphone Warehouse and Peter Wood (the Direct Line, esure and Sheila’s Wheels founder) among my early investors prior to attracting institutional investors such as ABN Amro, Gartmore and Goldman Sachs. SpinVox is now live on five continents in six languages – so angels and businesses can work to successfully establish a business.
Christina Domecq is the co-founder and CEO of voice-to-content services leader, SpinVox .
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