Friday, 4 March 2016

How Small Business can attract Angel Investors

The main challenge small business owners faced is business capital. Hundreds of wonderful business ideas and business plan remain largely unfunded.

Most commercial banks have made it clear to start-up that they can't help. Based on research, most small business start-up is funded by owners personal savings and family contribution.

The burden is now on successful entrepreneurs and other interested group to support or fund new businesses otherwise known as Angel investors and vesture capitalists.

An angel investor typically provides funding for small business during the start-up phase. Some of the angels are entrepreneurs. 

Therefore, making them available for direct mentorship.

The successes of small business tech start-up who are now tagged 'disruptive innovators' is also sending a strong message to investors to become venture capitalists.

For instance, the numbers of Angel investors in India alone last year Almost tripled to nearly 300(Industry body Nasscom).

Small business Funding life cycle:

Successful small businesses goes through four funding cycle:

1. Initial phase- Bootstrap
This is the idea phase and business start-up. Funding this period is either personal savings, family contribution or soft loan and corperative loan.

Some small business owners successful build their business to a profitable stage before sourcing for Angels or venture capitalists.

The advantage of bootstrapping is that the founder can build the business based on his own ideology and culture. Bootstrapping also put the founder at a better positions venture capital wise.

2. Crowd funding or Angel Investors
Once a start-up is able to assemble a strong management team, Angel Investor who consider the idea promising will take over the funding.

The Angel Investor may also invite his network(Angel investors network) to contribute to the funding.

Crowd funding website like kickstarter can connect small business to Angel investors.

3. Venture capitalists
Once the small business started having customers and requires more funding, venture capitalists will step in.

Venture capitalists is an organised investment company. In most cases, they invest in  successful start-up.

4. Initial public offer
This is the last stage. Only successful and late stage start-up reach the initial public offer(IPO) stage.

It's important to note that not all business start-up pass through all these 4 stages.

How to attract AngelInvestors

1.Locate an Angel investor or Angel investors network

The first step is to locate an angel investor or Angel investors network. Most country has a well coordinated  Angel network.

However, every Angel Investor has a sector of interest or business idea. Kindly do your homework before approaching any Angel.

For instance
Google India vice president and managing director, Mr Rajan Anadan, had invested in about 80 start-up since 2006. Most of his investment are in eCommerce and cloud based services.

Mittal, a member of India angel network and Mumbai angels, prefer Investing in business that has to do with mobile and consumer internet.

As a general rule, the small businesses that successful attracted Angel investors were able to directly or indirectly created a relationship, demonstrated learning and contineous improvement skills and financial discipline.

2. Approach a crowd funding site

Every crowd funding website has rules and specialization. You have to research and discover where your product or idea could sell.
These are some of the small business crowd funding site

Kickstarter's main focus is technology and innovation. Ideas like consumer electronics that could sell in a large market easily get funded.

Microventures Connect small business with Angel investors that will not usually talk to each other.

Somolend is a loan based platform for small business.

3. Explore new and growing industries
Most Angel investors have specific business of interest. However, based on trends, most of them invest in New and growing businesses like renewable energy, waste recycling, mobile and internet business, cloud and data marketing technology, ecommerce, weight and fitness etcetera

4. Strong management team
Every Angel investor do a serious check on the knowledge, skills and ability of the management team.

For instance, 
Anupam mettal, CEO of people's group is an angel investor who has funded over 50 small business start-up. "Anupam prefer investing in small business that has a huge market potential backed by a strong experienced core team" xeler8 said.

5.Original ideas
Every Angel Investor prefer funding start-up with original and unique idea.

For instance, Jobberman is a Nigeria jobsite that connects job seekers to real jobs. Even though there are many jobsite in Nigeria, Jobberman is the only one that is backed by Angel investors.

6. Keep a strong LinkedIn profile and maintain good online reputation
People with fraudulent motives has invaded the online environment pretending to have genuine business that requires funding.

Investors use LinkedIn and Google search to verify the authenticity of small businesses. Therefore, avoiding those with negative comments.

Real people with genuine business ideas still meet their Angel on social networks or online communities.

Dave Gowel, the founder of RockTeck raised $3 million in 3 years from 29 Angel investors. All the investors have one thing in common says Dave Gowel "every investor relationship I have was influenced by LinkedIn"

Finally, Google your name and see what comes out. If you have any thing, pictures or video that you are not proud of, kindly delete or make the necessary corrections because Angel investors also do some research about you online.

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