When you plan to start a new business enterprise but lack the necessary capital to fund the business, you usually look for ways to secure the necessary financing. You can approach a bank or any other financial institution for a loan. Another way to secure funding is to find an angel investor for your new business. The advantage of involving an angel investor in the new business is not limited to an inflow of funds but may also extend to the wealth of knowledge, expertise, experience and contacts that he could bring to your new venture.
If you want to avoid the usual hassles of approaching a bank for financing your new business, try looking for an angel investor, someone who is truly keen and interested in seeing your business succeed for all the right reasons, through networking or business contacts.
An angel investor is an individual who has funds at his disposal. Angel investors normally like to invest in a new business or start-up. Most often, the reason for such a move is to get more returns than what is available through more traditional methods of investing. An angel investor would invest in the new business to negotiate for a position in the company and would then get involved in the day-to-day activities of the firm. He can become your mentor and guide through your new journey. The angel investor, investing in a new business can be an entrepreneur who already perhaps has a certain business and would like to invest in something that would fill a support function for his current business. The angel investor, wanting to invest in a new business could also be a retired person with loads of time and money in hand, with a flair for investing in successful business deals. These angel investors do not necessarily want to be involved in the new business and are mostly happy with just getting the financial returns.
Although there are no certified details, it is estimated that every year nearly 30,000 small and new businesses are financed through angel investors. The total investments are in the range of 20 to 50 billion dollars each year.
It is extremely difficult to find people who would be prepared and ready to invest in a project that you completely believe in. The rule here is to use your social and professional network to identify such people. You can start by discussing your needs with your banker. Being in the financial market, he may know of people, groups and other investors interested in investing in a new business and can also provide you with a reference if the need arises.
You can speak with acquaintances and other business associates who may be in a position to provide you information about or references of people who may themselves be angel investors, looking to invest in a new business idea. It is a good way to reach a person who may give you vital input for the good of the business. You may also research on the vast platform of the Internet, where networking firms provide contact details for investors for a subscription fee. They will also include your contact and business details in their database.
If you are launching a new business and want to attract investors, writing a clean business plan is worth an effort whether you are seeking outside investors or not. That is because your business plan basically defines what your business is all about: It outlines your strategy for developing and growing your business and establishes how you will measure success.
Investors will want to see your new business plan; in fact, it may be the first thing they ask for. So make sure you have a strong, clear and crisp business plan ready for your new business idea so that it is easy to explain and convince the investors. Here are basic components you should consider including in your new business plan to attract the potential investors:
- Mission Statement
- Management Team
- Market Summary
- Business Concept
- Goals and Objectives
- Financial Plan
- Resource Requirements
- Risks and Rewards
- Key Issues
Having a business plan means you have already started down this path, but before you start knocking on investors’ doors with your new business plan, you need to be prepared to discuss some other issues. For e.g.:
- As the leader of this new business enterprise, investors are going to want to know about your personal credit history and how much collateral you are willing to put into the venture. You need to be prepared with detailed information.
- Investors want to hear more details about the competitive landscape.
- Having at least a basic marketing plan outlined will let the potential customers know you are serious about building a successful company.
The more ways you can demonstrate to potential investors that you have put a lot of thought into this new business, the more interested they will be. You might also be prepared to discuss how you are going to track your financials; it might be useful to have some knowledge of financial management software designed for new businesses.
Before you start talking to investors to get them interested in your new business idea, have a plan in place for how you will use their expertise as well as their money. It is likely that people who lend money to new businesses have valuable insight to offer from their experience with other start-ups or perhaps from starting their own companies. Make it clear when you meet with them that you would welcome their involvement and advice and suggest ways they could help you, either formally as a member of a board of directors or informally as an advisor.
This approach will show investors, wanting to invest in your new business that you are open-minded and willing to learn from others while at the same time, organised, driven and fully committed to making your business succeed.