Angel Investors are individuals who use their own
money to support small and new to market businesses they
believe in, hoping to make money if the business
succeeds.
In addition to taking an ownership stake, they also
provide financial help and share valuable knowledge
and experience to help the business grow.
Angel investors provide much-needed money to
help your business grow and develop, giving you
the funds to bring your ideas to life.
They often have valuable knowledge and experience
in the business world, and they can offer guidance and
advice to help you make good business decisions.
Angel investors can also introduce you to their network
of contacts, potential customers, or partners that could
support your business growth.
You’ll need a compelling business plan that explains
your idea well and how it will be profitable, to secure
an angel investor.
To get their interest, you’ll have to connect with them
at events, introductions or through online platforms.
Offering a stake in your business is also key.
Overall, delivering a convincing pitch and showcasing
your passion and expertise, will likely get you over the line.
Whilst there will always be exceptions to this, an equity stake of between 10% and 25% would be a reasonable expectation for an early-stage investment.
Many investors active in the early-stage market have a particular appetite for tech-based businesses with high growth potential. They will take a commercial view on the validity of sales projections presented to them by companies fitting this profile, but an experienced investor will also understand that the reality will always be that it is far more difficult and carries far greater risk to try and accurately project sales growth when looking at a high growth, aggressive model.
Another area an experienced investor will be familiar with (and usually fund) is where an early-stage company is undertaking R&D as part of its development plans. Whilst a company will typically carefully cost out and present its R&D programme, it’s then not at all unusual for there to be subsequent variances in both cost and timescale, which can often place additional pressure on cash flow. It is under such circumstances that the investee company needs to have an investment partner who, post-investment, it can trust and who is experienced enough to accept that there will nearly always be variances between actual performance and projected performance.
Fundamentally, whilst targets, milestones or value points may form part of the terms of an investment offer, an investor does not want to see their investment fail. So, if there is a justifiable reason for supporting their investment with additional cash, then they will usually be amenable when targets have not been met.
With a capable, experienced management team, it might well be that an investor can take a back seat and simply observe and monitor progress from a distance. However, where the management team is less experienced, the investor might feel the need to provide support or indeed, be asked to provide support. Most investors have experience in building companies and there is no doubt that early-stage businesses can benefit from this insight. An experienced investor will have also developed a network of valued contacts able to be brought in to provide specialist services across a wide range of disciplines.
Examples of support an investor might be able to provide or introduce are provided below:
The content and materials featured or linked to are for your information and education only and are not intended to address your personal or business requirements.
The information does not constitute financial advice or recommendation and should not be considered as such.
SimpliFi is not regulated by the Financial Conduct Authority (FCA), its authors are not financial advisors, and it is therefore not authorised to offer financial advice.
Always do your own research and seek independent financial advice when required. Any arrangement made between you and any third party named or linked to or from the site is at your sole risk and responsibility.
SimpliFi assumes no liability for your actions.
