All business angels are wealthy individuals looking to invest around 10% of their wealth in high risk and high growth early stage companies which they think can give them at least a ten times return on their investment over three to seven years. Many business angels are looking to get actively involved in the companies in which they invest and this means that they typically prefer local investments and investments that they understand, often on account of their own inside knowledge in the relevant business sector. The average size of an angel investment is £42,000 per investor and the average percentage stake acquired is 8%. Though on occasion a business angel will invest alone or invest more than £100,000 in a business. There is an even 50:50 split between angel investments in revenue generating businesses and pre-revenue businesses, though recent surveys suggest the average may be moving in favour of revenue generating companies. The average age of a business angel is 53 years old and 93% of business angels are male. To learn about the important issues in angel funding click here.
Most business angels do not have the time or resources to follow the many thousands of investment opportunities that arise each year. Accordingly, they typically prefer to have someone filter the deals for them allowing them and only to look at recommended deals. Common filters include other business angels, lawyers and accountants, but the most common are the business angel networks. A business angel network is a collection of angels arranged around one or more investment managers whose job it is to source investable deals. The networks all work in very different ways, though most are financed by charges on the businesses raising finance ranging from a few hundred pounds to several thousand pounds plus an equity strip and options.
If you are looking for angel investment you can directly approach investors, assuming you have or can acquire their contact details. However, the way you approach an investor is crucial. A direct approach in breach of the Financial Services and Markets Act 2000 is a criminal offence. Click here to download an article explaining this in further detail.
As many business angels avoid giving out their contact details, the most common way to contact business angels is through an investment network. A non-exhaustive directory of such networks along with some well known early stage angel investment companies is set out below:
There is stiff competition in the market to attract angel investment, however, by understanding the key issues you can significantly increase the chance of securing the investment you require. The key issues are:
Knowing who to approach Where you know a number of potential investors you should concentrate on those looking to invest in your sector. In practice it is rare to know the preferences of your investor before making initial contact. Knowing when to make an approach You can only make a first impression once and you should not approach an investor for investment (as opposed to advice) until you are ready. A high degree of investor readiness will ensure you achieve a high valuation and so have to sell fewer shares to raise the same amount of investment. Click here to download business angel funding expert, Paul Grant's guide to assessing your investment readiness. Qualifying for EIS Relief 57% of all successful investments have pre-qualified for Enterprise Investment Scheme (EIS) Relief and 80% of investors actively seek EIS Relief. Click here to download our article on EIS Relief and how to secure it. Protecting confidential information passed to potential investors One of the most valuable assets for a growth stage company is its confidential information. In the course of seeking investment you may have to share it with 20 or more investors, some of whom might in reality be your competitors. You should protect your business and its information. Click here to download this article to find out how. Knowing how to convert investor interest into secure investment On average, 90% of advanced discussions with investors end with the investor terminating the discussions and not investing. The most common reason for this is that the business fails investor due diligence. Click here to download an article on surviving investor due diligence. Doing a deal with investors on acceptable terms The terms of a deal with your investors will probably regulate the way your business works for the next five years. Investors will on average negotiate 40 such deals during the time they are actively investing and will accordingly be adept at securing advantageous terms. To learn more about the key legal issues and terms click here and download our article.
Jg
its really a informative review...
ReplyDeleteand with my point of view every investor should know precisely the type of
angel investor he want to partner with and the amount of funding he want to invest.
Thanks