Entrepreneurial Advice, Motivation & Startup Strategies

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.

I read an interesting post on The Challenge of Staying Focused in a Startup over on the Instigator Blog. Staying focused has always been a sticking point for me, like a lot of entrepreneurs I am seduced by ideas. I often spend hours deliberating new ideas and new ways of doing things, while spending a lazy afternoon mulling over ideas with friends in a bar is fun, it isn’t a productive use of a startup founders precious time. This particular point really resonates with me . . .

The big risk? Running in every direction, chasing every lead, idea and opportunity only to realize at the end that you’ve made very little progress.

Having true focus and prioritising tasks is of up most importance, particularly in the early stages of a company. Taking time to develop a plan that covers milestones and targets can be very beneficial at motivating you to stay focused.

Another piece of golden advice . . .

Opportunities that take too long to materialize are bad opportunities. Startups don’t have the time - especially right out of the gate - to spend long periods of time in negotiations or chasing leads.

In previous ventures I have fallen foul of this, spending time I should of focused on other areas I spent “chasing rainbows”.

Investors really notice focused entrepreneurs, of course they want to see creative risk taking and enthusiasm, but back that up with solid focus and you are on to a winner.

I will be exploring techniques for staying focused in future posts, in the meantime take a look at The Challenge of Staying Focused in a Startup

For a couple of years now, especially in the technology startups industry we are seeing a lot of businesses being built for the sole purpose of being acquired by one of the large players such as Google. From the outset it is clear that the business is being structured in such a way to make it appealing for acquisition, now it is important to have a clearly thought out exit strategy when seeking investment but grooming your company to be acquired by Google makes for shaky foundations.

The Googlebait Phenomenon

Google’s growing appetite for buying small technology startups has fueled a lot of innovation in the tech startup scene. So called “Googlebait” companies are appearing on an almost daily basis, positioning themselves to be the next beneficiary of the search giants bottomless “ad dollars” pockets.

Indeed it is important to work out potential exit strategies at inception but putting “all eggs in one basket” and forming the venture with this one goal in mind is risky to say the least. We are witnessing a unique time where technology startups can go from idea to launch with very little seed capital. This combined with other routes of exit such as IPO being increasingly difficult to obtain, fuels this Googlebait mentality.

Investors will be focusing as much on the execution of your business and its own revenue earning potential, as it operates and not solely at the exit. If you are hell bent at targeting Google as your exit strategy then they do make things easier for you, providing you have clear advantages that aid Google’s future business development goals. Google have a team of 15 full time employers in their acquisitions team and they have a policy of reading every pitch for acquisition.

“We see a lot of companies built to be acquired,” says John Burley, the head of Burley & Associates, a Washington-based business acquisitions services firm. “They come to us talking about how Google or some other large firm should buy them. More often than not, we decline to take these clients.”

The acquisition companies can often be reticent to take on these kinds of projects. The good news is Business Angels will have been through the acquisition process many times before so can add valuable advice, insights and the credibility which opens doors.

You have no doubt read and heard that barriers to entry are very important to investors when they are considering business ideas to back. It would be nice for every business to be in a position to have strong barriers to entry from the beginning.

However it’s relatively rare to be in a position to have a sustainable barriers to entry from the outset especially as it is becoming easier to duplicate technology or find ways around patents.

I believe it is preferable to focus on building the barriers to entry within the business, for example:

• Operating the business
• Having customers
• Good links with suppliers
• Press attention
• Creating a brand

These all create barriers to entry, perhaps not in the traditional sense but they do add serious value to your proposition in the eyes of the investor, and are things that every business can capitalise on when seeking investment.

Last week I was at the Startup Event at Olympia in London. One of the guest seminar speakers was Brad Rosser, currently a Business Angel and running a successful property investment service. Brad previously worked along side Sir Richard Branson helping to build the Virgin empire.

One interesting view he had, in particular relating to internet/technology startups was the fact that you should concentrate at launching when 80% ready.

I find this concept very interesting, I am sure a lot of entrepreneurs are like me and are striving for perfection, wanting to add on that extra AJAX element or killer feature that will blow the competition out of the water. Brad’s view is that when faced with the decision to start launching now or holding off and waiting for the perfect product you should always get the product out there. I have to say I totally agree.

I am not saying I agree with launching a product with the label Beta when it isn’t even ready for initial testing but if your product is at a stage when users can start benefiting from it then it is time to bring it to market.

Talking from my experience a lot of founders (including myself) tend to focus heavily on the backend when launching a new business venture. Brad’s view is, particularly at launch the entrepreneur should pour all energies in to the front end promotional aspects of building the brand and getting it in front of the people that matter.

Of course you will also have the added benefit of using your early adopter feedback to make further improvements, additional features that you may not yet of even thought of. You will be surprised what directions your creative mind may go in when reacting to feedback from these initial users.

What possitive attributes do successful startups share? Here is a short rundown of some of my observations of what characteristics these startups have in common.

Create a market

Successful startups create new markets, exploit existing markets and adapt what other, more established businesses are doing in their current business space.

Are interesting to Business Angels & VCs

Successful startups are often appealing to investors because of their growth potential and unique take on existing problems.

Is innovative and pushes the boundaries

Successful startups push the boundries of the norm, they make people take a step back and think “why didn’t I think of that?” and “I’ve never seen anything like that before”

Are flexible and nimble

Successful startups can adapt to market changes much faster than their larger more established competition. They also react to customer feedback and grow their systems and business processes before they have become too large to be as agile.

Has a grand vision and plan

Successful startups have a clear vision of where they want to be and how to get there. They plan out a serious of milestone achievements which culminate in the execution of their grand master plan.

Their idea is not easily replicated

Successful startups ideas are hard to replicate this appeals to investors who are looking for good Intellectual Property protection. The combination of clear vision and strategies to achieve the goals leads to the market traction that investors love.