9 things every Business Angel needs…

The 9 things every direct business investor or business angel needs:

  1. Deal Flow
    There are more and more sources of direct business investment opportunity – you need to find a way to track them and pick out those that deserve more attention. Firstly, you’ll join networks or groups, which is often free, and then you’ll begin to see a flow of deals. Often, the network will consist of some industry specialists and you may find that it pays to get to know those who work in industries that you know or wish to invest in.
  2. A Nose for a Deal
    Over time your gut will tell you whether to invest or not. George Soros always says that he sold when his back hurt! However, until you reach that exalted status, you’ll need to track and watch what happens. Key to this is to figure out which companies don’t get funding and become successful anyway! And which companies DO get the money, but fail anyhow!
  3. Advice
    Firstly, understand what each persons motivations are. Some advisors are on commission others have a stake in the business etc… This will impact on the degree to which you are wise to trust any advice. Equally, if you can, find a willing mentor who can guide you through your early investments
  4. News
    The business angel industry is move from a cottage industry status to become a more established source of finance. As it does, there are better websites and more information and news which you can follow.
  5. Standard Contracts
    Legal fees can kill a deal. The levels of business angel investment (from £50k to £1m) mean that legal fees can easily eat up the stake invested if both parties are not careful. Therefore, judicious use of some standard tools or contracts is wise. Then bring your lawyers in to make the final tweaks to those contracts.
  6. Checklists
    Checklists are a great way to make sure you don’t forget that all important question! Also, don’t forget that the companies looking to raise finance will be keen to promote the positive aspects of their opportunity. In many ways, your role is to spot the weaknesses and decide if any of those weaknesses are serious enough to kill the idea.
  7. Strategy
    There are a number of different investment strategies that business angels use. These strategies will help you build a portfolio of investments rather than help you make a decision about a single investment. Questions you’ll need to answer include how much to invest and how many investments to enter into? One sector or many? Geographically close or distant? etc…
  8. Exit
    How can I find out about exit strategies – for example, on straight equity vs debt that converts to equity?
  9. Share
    Be willing to share experiences and learn from others. Investors can teach other a huge amount, but only if they are willing to share. Find a group you are comfortable with – who share you ideas and values and start sharing stories and experiences

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