Angel Financing - The Benefits of Angel Capital
The term “Angel” comes from the days where investors used to help theatrical productions get produced. In the modern era angel investors provide angel capital to early stage companies with high growth potential.
Angel Investors are typically successful entrepreneurs in their own right who would like to get involved with a business at an early stage, this could be for an opportunity to put their knowledge and expertise to good use, for tax reasons, or simply to benefit from having shrewd business investments with the potential of high returns.
Why Angel Financing
Releasing an equity stake in your business in exchange for angel capital will enable you to achieve your goals much quicker than growing organically or relying on increasingly hard to find bank financing.
Angels will also bring a wealth of experience that money can’t buy. They will often have industry contacts and will add a level of credibility to your venture, in the eyes of your clients, suppliers and future investors.
Where to find Angel Capital
Finding Angel Financing can be nutoriously difficult, in the UK you can browse the British Business Angels Association website where you will find information on angel networks. In the US there is the Angel Capital Association which segments angel networks in to regions.
What Angels are looking for
The criteria for Angel Capital is less structured and rigid than the requirements for Venture Capital. The Angel, being a private investor, is in a position to take a more optimistic view towards potential drawbacks.
There are certain key factors that an angel investor will be looking for in potential investments:
- You have researched and understand the target market
- Your business has clear goals and you stand firmly behind your business plans
- You have a clear understanding of how you will go about achieving targeted growth
- You have the necessary skills within your management team
You management team may well be laking in certain areas. The good thing about angel investors is that they will often step in to the role of adviser and mentor, which will go a long way to compensate for any areas that are lacking in your current management team.
Should you go for equity rather than debt financing?
If you have rapid expansion plans and want to achieve your goals in the shortest space of time, whilst minimising the risk to your personal assets then seeking angel financing could definitely be a good route to follow.
