Finding business angels to invest in growing companies

Remember that investors are not looking for “the perfect deal”. Experienced investors know that profit comes from risk taking, backing their instincts, often when others are afraid to act.

Let’s look at some of the things that turn off investors.

First on the list is paying for the problems of the past. Investors want to finance the future. So if you are really re-financing existing debts many investors will be put off; not all, some like this type of situation, but most do not.

Next are big salaries before the business has proved itself. This is a big turn off. You may think you are the best thing since sliced bread, but an investor will want proof. Better to go for a low basic salary and some sort of bonus based on performance.

The famous hockey stick is the next issue. This is where the investor is asked for a big lump of money on day one; sales start two years later and suddenly in year five the company zooms into profit and positive cash flow. This is all too common in business plans.
The solution is a funding plan: breaking down the cash required into stages and linking it to specific achievements in the business plan. We focus on this approach, it really works.

The next two problems are closely linked and concern existing investors or directors.

If the entrepreneur is wealthy, an external investor will expect them to commit something. Do not expect an investor to commit money if you don’t. Similarly if the company has existing external investors who are not willing to put in more funds, the obvious question is why? This is a tough one to answer.

I think this can be a bit unfair.

One of the most durable truths about successful investment is spreading risk. If existing investors have reached the limit of their desired exposure to this particular investment than stopping is logical based on the investors portfolio strategy and not on the company itself. But it’s still a difficult argument to win.

The last issue I want to talk about here is the “getting to market” issue. Many great ideas fail because they don’t have a “route to market”. Bluntly they don’t sell. Remember Betamax was a better technical system than VHS but VHS made the sales.

This brings us back to the key issue – the charisma of the entrepreneur: that energy and drive which convinces people to buy.

We all kid ourselves that we buy rationally after carefully weighing up price, quality, after sales service… Yet the latest brain scanning technology shows that our subconscious mid is the real decision maker.

One of our entrepreneurs with a good business idea, but nothing special, has been literally been pursued by investors who want to invest, including a venture capital fund. He oozes charisma and got his money two weeks ago. Now we will have to wait and see what happens. I guess he will either be a budding Richard Branson or as the saying goes: “when a man with money meets a man with experience; the man with the money gets the experience and the man with the experience gets the money.”

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