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The top 10 things business angels look for in a venture
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The main characteristic shared by business angel investors is that they are prepared to risk their capital in a venture in the expectation that they will realise a healthy profit on their investment.
If you are looking for investment of any type, you need to ensure that you can offer potential investors something special. You need to be prepared to back up any forecasts and claims you make, and be clear how much capital you require, for what purpose, and what returns an investor may expect to make.
Some of the key things an investor will expect to see in a potential venture
1. Uniqueness
What is special about the venture or idea? What are the unique selling points of your business? What sets it apart from the competition?
2. Strong team
Who are the founders and main team members? What expertise and experience do they have?
3. Founders' commitment
An investor will expect existing shareholders or stakeholders to have risked their own money in the venture as well as a lot of elbow grease.
4. Is there a market?
The business owners should be able to demonstrate that there is a market for their idea. They should be able to identify their key competitors, and the possible threats to their venture from the marketplace.
5. Credible planning
Many entrepreneurs think that business plans are not worth the paper they are written on - they're rarely accurate, and they cannot account for the rapid changes which take place in fledgling businesses. Not all investors will not be impressed with this view. You should have a solid business plan and proposal for investment, which includes realistic growth forecasts. Of course, an investor will be far more impressed if you can prove that you have already made sales or generated revenue from your venture than they will be from the most refined of business plans!
6. Funding needs
If you are looking to sell a stake in your venture to a third party, you must be realistic about valuation. Business owners often attach a far higher price to their ventures than others, due to the emotional attachment they have. Have a pragmatic approach to negotiating how much of your business you are prepared to give away in exchange for the investment, but be prepared to walk away if there is too large a gap between the two sides.
7. Business interest
Most business angels will invest in areas of business they have a natural interest in. They may well have experience to offer as well as capital.
8. Exit route
Does the business have a clear exit strategy? Investors will want to know what their proposed route to exit is before taking the plunge - whether the plan is to sell the business on for a profit, or for the founders to buy out the angel's stake somewhere down the line.
9. Timing
Investors of all types are affected by the prevailing market conditions - both macroeconomic, and also industry specific. You are more likely to attract investors when economic conditions are healthy.
10. Intangible factors
Angel investors often rely on their own instincts when looking for new ideas to invest in. Sometimes they will just feel that a business is the right fit for them, or they may be particularly impressed by the commitment and energy of an individual or team. These intangible factors may well be the key to doing a deal, and they are impossible to anticipate. Don't underestimate the power of personality when dealing with potential angel investors. |
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