Business angel funding is a great way for budding entrepreneurs to finance their start-ups. But before you pitch your tent with the funding sources of a business angel, you need to be fully aware of all the associated risks and benefits. This means that you must do your homework before approaching a funding source. Start by asking yourself the following questions: What type of investor would I be comfortable having working with me? What type of investor would I need to have a successful relationship with in order for us to have a successful business?
If you are looking to raise seed money or bootstrapped capital, then you must focus on two things: your product or service and your business plan. A funding source that has an interest in your startup will want to know more about both of these topics. They will look at your business idea and your products or services to determine if they will be able to invest in your company. If you plan to sell securities in your business, your potential funding source must also have experience selling these securities.
Most angel investors will require a significant amount of personal information before offering you any capital. These investors usually require entrepreneurs to fill out detailed documentation about themselves and their businesses. They will also require documentation about the products or services you intend to offer to customers as well as the history of your business.
Business angel investors usually provide credit facilities to new and small companies. Capital provided through a credit facility is often considered easier to obtain, since you are often not required to provide credit card information upfront. Your capital provider may require you to provide financial statements and periodic reports that will allow them to evaluate your business’s viability. Capital from other investors can also be used for initial capital and may be required to be turned over to your angel investor team when you are seeking additional capital for your company.
Private funding sources typically work with private individuals or companies that have the highest net worth. Therefore, they are not likely to fund companies based on the value of the individual or company alone. This makes it important to your business’s success that you work with an appropriate funding source that has the ability to provide credit facility or seed financing. Many angel groups provide seed financing, which provides small amounts of cash to a company in exchange for usage of their technology or territory. Another common type of private funding is venture capital, which is provided by venture capitalists.
Angel investors usually invest in several companies. This means that you are highly unlikely to ever find yourself in a situation where you are competing with more than one angel investor. However, in some cases, multiple private funding sources will compete for capital dollars. It is important to understand the cost and risks associated with working with multiple funding sources.