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<\/a>From Basic Berkonomics: Available Amazon, B&N, berkus.com and booksellers everywhere.<\/p><\/div>\n
The U.S. Angel Capital Association (ACA) lists over four hundred member groups, located throughout the country. The European Business Angel Network (EBAN), and similar organizations in other countries including Canada, all have web sites with directories of angel groups that are local to you.\u00a0 And even though angel groups syndicate their best deals within their respective associated networks, it is always best to apply to the angel groups nearest your physical location. If you are starting a virtual company with your employees working from home locations, as many startups do, it should be the location of the founder.\u00a0 All angel groups will want to see the founders in person at sometime early in the process. Being located in a distant city greatly reduces the chance of funding success.<\/p>\n
[Email readers, continue here…]<\/em> <\/span>\u00a0 With angel groups, you should plan of spending months in the process, from application through funding.\u00a0 You will have to hone your story well, down to fifteen minutes and perhaps fifteen slides in your presentation.\u00a0 Your opportunity becomes real when you are invited to present to the entire group at a lunch or dinner meeting, after which time one of the members or a paid group leader begins to seek commitments from the members to invest in your<\/p>\n company.\u00a0 You will be given a \u201cterm sheet\u201d during the process, calling out the terms proposed for the investment.\u00a0 These terms have become much more homogenized over the years, with many organizations adopting the same general form and terms offered to new investments.\u00a0 Your principal focus may be on the valuation of the company before the investment is made, which determines the amount of the company you will retain after the investment.<\/p>\n Second, there is a rather new term for those large, individual investors who are usually former entrepreneurs made rich through sale of their previous ventures.\u00a0 These \u201csuper angels\u201d act alone or in informal groups, and require that you find your way to them through personal introductions from their trusted associates.\u00a0 The advantage to getting the attention of a super angel is that most operate informally and make quick decisions with little due diligence. \u00a0This class of investor typically writes checks from $50,000 to $250,000.<\/p>\n The third group, venture capitalists, rarely invests in startups, usually reserving their investments for companies that have star entrepreneurs they have worked with before, or companies brought to them by angel groups or other trusted sources.\u00a0 VCs often invest no less than $2 million in a single deal, finding it difficult to put less money to work and still spend time on boards and coaching entrepreneurs to a successful liquidity event.\u00a0 VCs need much higher exit values to justify their higher amounts of investment, and often want companies they invest in to be worth more than one hundred million dollars at exit, not a riskless task.<\/p>\n The one thing in common with all professional or organized investors is the focus upon the exit, or liquidity event, in which the investors can realize a sale of their interest and a profit from their investments of time and money.\u00a0 For early stage investors, the usual expectation is seven years from investment to expected liquidity.\u00a0 When you take money from any of these sources, you make a pact to build, with their help, a business that can be sold or taken public, hopefully within that time period.<\/p>\n These professional investors look for at least ten times their invested money back upon the liquidity event, knowing that the odds of achieving that are only one in ten, and that half of their investments will probably die before any liquidity event at all.\u00a0 They look for businesses that are in large markets, that can grow fast, and that can achieve revenues in excess of $40 million within five years of founding.\u00a0 Those are difficult goals for most entrepreneurs, making this form of financing unavailable to most, but attractive to those that fit into these criteria.<\/p>\n","protected":false},"excerpt":{"rendered":" We\u2019ve spoken of financing a young company through friends and family, known as \u201cinside angels.\u201d\u00a0 There are three classes of equity investors for early stage businesses that we have not yet considered.\u00a0 Often grouped into formal organizations, these investors are … Continue reading