When thinking if business angel finance is right for you, it is essential to understand that, whilst they do offer finance to support the business over a number of growth stages, angel investors are essentially looking to get their money back. So, they may expect your business to sell to a larger business or even list on the public markets. They may even seek to pass the baton on to a bigger investor.
It is also important to understand the perspective of angel investors and what barriers they have towards the creative industries. When approaching angel investors, it’s important to note that the most important aspect of the business they’ll be examining is you! Angels often think that creatives are “flaky” and have no business skills, so it’s extremely important for you not just to show what an amazing product you can create, but that you have the drive and talent to build the business. If you don’t, then make sure you can demonstrate someone in your team who does!
The second ‘must’ is to demonstrate your capacity to grow and scale your business. While your product might be great, angels are investing in the growth of your business and want to know that you have identified an extensive market opportunity to exploit.
Since not all angels will be familiar with your particular creative sub-sector, it’s important that you provide market intelligence such as who are the key players in the area, who is making money and how do you compare with these competitors?
So how do you find angels? Good places to start are the established networks and groupings, many of whom are members of the UK Business Angels Association trade body. UKBAA operates a free online searchable directory listing of all the investor members by both region and amount of finance. You may be invited to meetings or to participate in mass pitching events.
There are also an increasing number of online showcasing sites, where you can create a profile for angels to discover and consider.
After finding an angel, it’s about attracting their attention. Generally you need a two-page executive summary and a short Power Point which summarises all the key points I’ve discussed. You will also need to show five-year financial projections, and a tip here is to be ambitions yet realistic to avoid the hockey stick! State what you need the investment for, why an investor should come on board and how you plan to give them an excellent return on their investment.
When seeking angel investment, don’t forget to ask key players in your own sector if they would consider being an angel investor and tell them about the great tax breaks you can offer through the Enterprise Investment Scheme.
Remember, the whole process can take up to three months to close a deal so you need to build that into your fundraising schedule. Be patient, and good luck in finding your angels!