Startup Angel

im 15 to let you know where im coming from.

sincerely,
the aspiring Entrepreneur

I have a friend who wants to have his inventions developed, and he needs a venture capitalist to help him by writing to you to ask about this.

I have recently applied for a Provisional Patent (using a professional law firm) for an innovative invention in which I have been working on for over a year. I have all but depleted funds for getting the prototype off the ground and funds to promote the product inside the USA with vision of global promotion. Would anyone be interested in what I have to offer with this idea or be able to put me in contact with an Investor to speak with.

Thank you

what is the maximum you can secure in hedge funds for a business startup? millions? how many?
and how do i know if a hedge fund company is a good one?
to Net Advisor :: i have some good biz ideas and need investments…. are hedge funds good?? do you know any good places?? if you are into hedge funds, maybe we should talk if you are interested in biz …

im a Tattooist looking to open my own shop and since im not working right now my funds are zero, i am looking for somewhere that will do a small business startup loan or grant for someone with bad credit. divorce does that to you ya know lol! and PLEASE dont say Matthew Leskos book! oh ya i live in Northwest ohio!

I guess you could say that I am a young entrepreneur. I know that many older men have put their money on the line investing in various investing opportunities, obviously some successful and some not so much. I, however would love to learn from any mistakes you have made or any success you would like to please share with me. I have roughly over $2000 and am looking for a good place to put it. Thank you.

A small organic skincare company is looking for seed money. Nice business plan for explosive growth… The research and development is completed already. Needs to take the next step…

Copyright (c) 2010 Cynthia Kocialski

Much like sports, a startup can’t win a race by winning a qualifying round, but a startup can sure lose the race in a qualifying round. Much has been written about the elevator pitch, the two minute presentation, investor call back presentations, and the series ABC’s alphabet pitches. The basis for all these presentations is the Slide Deck, a standardized format for presenting a startup to an audience. All of these things are the qualifying rounds, winning a round does not mean you have won the start-up game, winning means you get to continue to play, lose and you may be sitting on the sidelines for awhile.

While there are many version of the Slide Deck, all are very similar in the information to be presented to an audience. Here is one version.

* Company Overview – Problem, Solution, Product

* Market and Market Context Your Company Addresses

* Business Model

* Progress and Milestones

* Competition and Company’s Secret Sauce

* Partners, Customers & Pipeline

* Team – Founders, Advisors, and Mentors

* Finances

* Exit Opportunity

While all of these categories are important, some are more important than others. So where should an entrepreneur focus their attention? Here’s a typical weighted breakdown of how a company is evaluated for funding from an investment group.

* Team (25%)

* Customer understanding (12.5%)

* Market Opportunity (12.5%)

* Business Model (12.5%)

* Competition (12.5%)

* Product (10%)

* Financials (10%)

* Exit Opportunity (5%)

Interesting enough, most entrepreneurs focus too heavily on the product. That’s great if you’re giving a customer presentation, but an investors aren’t interested in using the product. They want to make money and the sooner the better. What interests investors most are how does the startup make money and how does the startup plan on increasing the value of the company. Look closely at the evaluation criteria, and you’ll notice that it’s mostly about marketing – customer understanding, market opportunity, competition, and pricing schemes (part of business model) are all marketing issues.

I often sit through many investor presentations and pitch sessions. By far, the most number of questions are about what the product is. You need to do this succinctly and more often, using an analogy, metaphor or story can quickly get the concept across to your audience. You need to describe in one sentence. Keep it simple. I often hear investors asking for a use case. They want you to describe a specific customer case or walk them through the steps of how someone uses your product. Founders are often subject matter experts on a technology and don’t take the audience into consideration in giving their pitches. They speak as if they are talking to other experts. Investors have their own expertise and it’s not likely the same as the start up presenting. Another problem is using most or all of your time describing the product, and leaving little time to describe the business around the product, which is what investors want to hear the most.

If you manage to describe what the product is, the next questions are about the business model. Sometime the business model is half-baked or unclear. Other times they are looking for the assumptions, those leaps of faith that are the difference between success and failure, and how you plan on validating them. The top questions are always: What is the customer value proposition? How do you make money? How do you plan on selling this widget? Who is you competition and how do you compare?

A startup defines and develops a product or service based upon the needs of the customer. Likewise, when it comes to securing funding, the startup company itself is the product. The best time to entice investors is when the start up achieves a milestone that significantly increases the value of the company. The entrepreneur needs to build a company such that it becomes attractive to the investors because somewhere along the way, entrepreneur is going to need some sort of investment or financial assistance.

The term angel investor was originally coined in show business where it was applied to a wealthy individual who would take the risk of privately backing a Broadway show when conventional funding failed to materialise.

Today the label is commonly applied to describe an individual who invests private wealth in a business. Nearly a quarter of a million angel investors are currently estimated to be providing around three billion pounds to UK business each year. The cumulative pool of investment from this quarter stands at around twelve billion pounds, a figure that exceeds all UK venture capital lending and is equal to a full seven percent of the total UK bank business lending. A very clear indication of just how much UK business craves growth funding sourced from the private sector.

As a group, angel investors are a major source of business financing, however the average angel will reject ninety-seven percent of funding applications made, selecting only those with real attraction.

Why would you consider Angel Investor funding for your company?

Angel investors usually operate in the gap area where entrepreneur sourced funds have run low and the business is not yet mature or large enough to attract venture capital investment. Not every company is going to find itself in this particular position. Indeed if lack of investment is merely slowing growth, it may be better to extend the expansion program by a few extra years and allow time for growth through profit rather than seek external investment. It is when a company needs rapid expansion to capitalise on a market position that external investment becomes most attractive.

How would external funding from an Angel Investor affect the management of your business?

A typical angel investor will have extensive management experience. The investment will be private money and the investor will seek to use personal skill and experience to ensure a thirty-five to forty percent return on capital. In short, the angel investor will want an active management role. How this will affect your company and your management method is crucial to the decision on whether an angel investor is a valid way forward or not.

After around five years, most angel investors would wish to withdraw leaving your business with a broader trading base, larger turnover and greater profit. Provided all has gone well, the investor will have made his target return, benefited from tax relief under the UK Enterprise Investment Scheme (EIS) and enjoyed the experience. Through the hands-on role he should have contributed something to the development of the management team and it is how the management team cope with this learning process that will determine how effectively the time ‘in harness’ with the investor was spent.

Of the many questions to ask before commitment three of the most prominent must be –

1. How crucial is the funding to the business?

If you are not entirely sure that extra funding and extra growth is essential, it is questionable if any external finance is required.

2. Can the management team accept the inclusion of a powerful influence?

A seasoned angel investor will have his capital return, enhanced by the EIS tax relief, as a prime motivator. However, he may well have many secondary motives built into his business ethic. It would be unwise for any young entrepreneurial management team to expect an angel investor to be overly aggressive or predatory in business approach. Expect a high degree of moral and social regard in his decision making. Additionally, he will be very experienced in the handling of people and situation, so an ‘easy ride’ in management conflict situations is not to be expected.

3. Are the management team willing and happy to learn?

If the management team can accept the period of involvement as a time of learning, the process could be of great benefit to all concerned.

If, when all of the above have been considered, you still see your best path as external funding, to be provided by an angel investor, prepare your business case very carefully. With only three percent of requests finding favour, your proposal will need to be very sound and very exciting.

Good luck.

© Copyright 2007