Angel Financing for Entrepreneurs is a comprehensive collection of the latest information on angel investors and a valuable resource for entrepreneurs seeking angel capital. This book will help you understand how angel investors think, how to identify their expectations, understand.
The Basics About Angel Investors
One of the most important attributes of angel investors is the willingness to bring knowledge to companies during their start-up phase. Angel investors are the main source of initial/start-up and early-stage funding, putting their faith in the economic process behind new companies.
Private Equity Investing
Security type: Series A Preferred Share (the "Preferred Share"), which is initially convertible on a 1:1 basis into shares of the Company's Common Shares (the "Common Share"). Board of Directors: The size of the Company's Board of Directors is set at five.
Understanding Your Funding Needs
Liabilities are the claims of creditors on the company's assets, while equity is the shareholders' remaining ownership of the assets. She is confident that she will hit the numbers due to the advanced stage of conversations with several potential clients. You can imagine the possible variables, from increasing discounts on conversion to additional shares to even board seats or control of the company.
Friends and Family: For many entrepreneurs, friends and family members can provide some of the start-up capital the business needs. Professional investors can be wary of friends and family because the people in these groups are typically inexperienced and do not understand the complexities and often harsh realities of business growth and change. Banks: Most commercial banks do not lend to young companies due to the lack of assets, operating track record, sales, customer base and other factors that carry inherent risks.
Technology Licensing: The term is used to describe the process and underlying documents related to a company's acquisition of the rights (most desirably exclusively) to commercially viable technology. An example of the latter would be a pharmaceutical company licensing the right to drug discovery technology from a small biotech company. Appropriate licensing of technology and actual right to use the technology is one of the big questions for entrepreneurs.
Looking for Angels and What Angels Are
Lists cannot be completely comprehensive because of the constant creation of new groups and the frequent difficulty of identifying groups. Individual Angels: Not surprisingly, high net worth individuals often know others with the same financial means. For the most part, this relative acceptance of failure is confined to the two coasts of the United States, which happen to have the longest history of private professional investors.
Because of the importance of management in determining investability, it is important to look at individual personality traits to understand the star entrepreneur. In fact, those who do may face difficulties in market acceptance due to the unknown source of the product. Experienced angel investors have a lot to say on the topic of a winning company; the following passages give an understanding of the relatively uniform value sought by the angels:.
David Grahame, with LINC in Scotland, reiterates the importance of the management team, especially one that is coachable, with "the true pearls of the entrepreneurial world are those who are looking for men. Thurs." But ultimately, if you can't give investors a nice return on their investment, you are not an angel-fundable company.As a result, investors are looking for winning companies of the type described earlier in this chapter.
Preparing for Investors
One of the lessons serial entrepreneurs learn from their first venture is to engage a skilled attorney early in the process. Minutes from shareholder meetings as well as meetings of the board and permanent board committees. Evidence of qualification or exemption under applicable federal and state blue sky laws for the issuance of the company's securities.
Documents relating to any significant conversion, recapitalization, reorganization or restructuring of the company, if any. At the time the option is issued, Rita and Craig still own 100 percent of the company because options are a right to buy stock, not actual stock. Based on this understanding of the need for different stock structures, create your company with sufficient common and preferred stock.
National ownership of the mark and the corresponding exclusive right to use the mark nationwide in connection with the goods or services listed in the registration. Despite their willingness to bet on the company's long-term success in part through their hard work, it is still your company and your dream. Tell them the status of the company; keep each other informed of setbacks and celebrate each other's achievements.
Making the Match
If you have broad platform technology, with multiple market opportunities, mention the others, but focus on the first market you want to enter and why. If you have defined the market as
Find out in advance whether you can bring another member of your team with you, if you wish to do so. Simply put, if you don't have your pitch and pitch cold, you're not ready for prime time." Angels may even be concerned if you seem too conservative in your numbers, suggesting that you have tempered passion or are pessimistic.
Investors want to know you've thought about it and will continue to plan for the most viable exit strategy. Do you have a realistic understanding of your overall market and what portion you can capture in what time period. Prospective investors will ask themselves: If you are out of touch with reality on your valuation, how else are you being unrealistic.
The Investment Process
Note: If Ms. Archer is very busy, so instead of asking her to give you a direct introduction, ask if you can use her name as a reference when you contact Mr. Collins and other potential investors. In your correspondence with Mr. Collins when setting up the office visit, be sure to mention the need to sign a non-disclosure agreement. Mr. Having this discussion with Mr. Collins, it will let them know what information you consider confidential and also establish that you take your intellectual property rights seriously.
Make copies of the materials you plan to review with Mr. Offer him something to drink or eat, depending on the time of the meeting. If you have product posters or trade stand materials, hang them in the office. To avoid headaches (and wasting Mr. Collins' time), take care of a few essentials before starting your due diligence.
First, if you haven't already touched on it, talk about your desired investment vehicle. While some investors don't care if you have all the business conditions covered, why take the chance. If you have patents or patent applications, provide copies and also a list of any prior art you may have cited in the application.
After the Investment
Robert Wiltbank, assistant professor of strategic management at Willamette University, conducts research on angel investors and provided some interesting empirical data in a January 2006 white paper titled "At the Individual Level: An Outline of Angel Investing in the United States." dr. How often will they be in the office? You don't want your investor to just walk up and engage team members in conversations without prior planning. Who will they work with? Make sure these key members of your team are involved in discussions to set expectations and develop mutually agreed upon processes for investor activities and contributions.
Angels also invest because of the personal connection they have to your business and you. You cannot necessarily avoid problems such as a downturn in the market, but you can be prepared with a contingency plan. They have built one or more successful businesses, which gives them a positive reputation in the market.
Even if you don't hear back, your angel investors haven't forgotten about you. Although IPOs can attract a lot of press attention, they are relatively rare in the United States and almost non-existent elsewhere in the world. In other words, the compliance costs of the acquired private company are passed through the private company to shareholders in the form of a reduced valuation.
Glossary of Terms
Related to Private Equity and Debt Financing
Registration Requirement: A resale registration that entitles the investor to require the company to file a registration statement registering the resale of securities issued to the investor in a private offering. Key employees are typically retained through stock options and/or company ownership. Limited Partner (LP): An investor in a limited partnership who has no voice in the management of the partnership.
Liquidation: (1) The process of converting securities into money. 2) Sale of company assets to pay off debts. If money flows out of the fund, the number of issued shares of the fund decreases. Partnership: An entity in which each partner shares in the profits and losses of the partnership.
Regulation S-B: Regulation S-B of the Securities Act of 1933 governs the Integrated Disclosure System for Small Business Issuers. Resale registration: Registration by a company of the investor's sale of shares purchased by the investor in a private offering. This stock is typically convertible into common stock in certain cases such as an IPO or the sale of the company.
