January 20, 2013
With the economic recession still in effect in many countries including the United States, money is hard to come by especially for fledging businesses. Banks, credit unions and other traditional financing institutions are imposing stricter lending requirements on applicants, thus, making it harder for entrepreneurs to get their businesses off the ground. Fortunately, there are angel investors who tread where others fear to touch with a ten-foot pole.
Investments in a Person First, Business Second
Traditionally, angel investors are affluent individuals who invest in start-up businesses with the expectation of either ownership equity in the enterprises or convertible debt payable after an agreed period. These individuals deal directly with the entrepreneur and invest their own personal money on the businesses.
In recent years, however, angel investors have organized themselves into angel networks ostensibly to pool their investment capital, share their research resources, and ensure higher returns on investment. These angel networks are often the better option for entrepreneurs mainly because of their businesslike approach to investment.
In either case, angel investors usually invest in the person and his ideas first and then in the viability of the business second. Many an angel investor is focused on providing assistance, including financial funding and technical support, to help the entrepreneur and his business succeed instead of reaping huge returns on his investment. It then becomes necessary to have a personality that appeals to the angel investorâ€™s personality and a solid business plan that appeals to his financier side.
If you can combine these two aspects during your presentation to an angel investor, then you have high chances of getting him on your side. No worries: You will find plenty of resources to combine a winning personality, a winning business plan and a winning presentation.
You can always ask family and friends to invest in your business, but it is a better idea to approach angel investors. You will be able to polish your business plan, enjoy the benefits of a de-facto mentor, and acquire larger amounts of capital for your business with the latter option.
Persuasive Techniques to Use
Well, of course, finding angel investors is relatively easy considering the close-knit ties in the business community. Getting an angel investor â€“ or a group of angel investors, for that matter â€“ on your side is another matter. You must work hard for your seed capital as much as you will be working hard to multiply it to prove your worth in the business arena.
You should keep the following tips in mind when persuading angel investors to pour their time, effort and, most importantly, money on your ambitious project:
- Perfect your elevator pitch but be sure to inject it with a sense of spontaneity, passion and a good dose of your winning personality. Keep in mind that you are selling yourself as much as your business.
- Present a solid business plan. Let it speak for you while you are not in the room with the angel investor anymore. Your strong business plan is one-half of the battle in persuading angel investors won.
When you have persuaded angel investors to pour money into your business, your success has just begun. Now go to work and build your business!