The majority of startup enterprises begin with an idea conceived by two or more people working in partnerships or a group. The chances are, the founders of the business will know each other well, they may even be friends or family members collaborating on a great business idea, the problem is even the best of relationships can be tested to the limit by the inevitable day-to-day pressures that come with running a business.

Do you have a Tevez in your startup team?

As anyone who saw a certain Champions League game this week will know, teams can be affected badly by  disharmony in the ranks. If one member of the team suddenly refuses to play ball, this can have a dramatic affect on morale. Even the most promising teams could feature a Carlos Tevez type character harbouring underlying issues so it’s vitally important that everything is done to prevent problems in those early stages when a business is launched so no one feels aggrieved when changes happen.

The honeymoon period…

A startup is typically launched with a great deal of enthusiasm amongst its founding partners, the ideas are flowing and there is often the euphoria that accompanies that first big order, or securing that first big client which tells you that this business idea really does have legs. This is the exciting honeymoon phase of course, the foundations are being laid for future success and there really can’t be anything that would get in the way of reaching that first million. Or could there?

This honeymoon period is unlikely to last long as the influx of orders and signing up of new clients paves the way to late nights, seven-day weeks and the dreaded accounts. As a lack of cashflow can quickly kill a business in its early stages, a large proportion of time will be spent on maintaining it.

This can be a particularly challenging phase for startup founders and one fraught with danger.

There may be trouble ahead…

If we rewind to that early honeymoon phase this is the point where agreements are made and firm foundations for trust between the partners must be established.  If those foundations are weak, there may well be trouble ahead  because like any relationship, business relationships must be based on trust.

Startup founders who do their homework will establish this through written agreements but unfortunately this can be overlooked by inexperienced founders, often to the detriment of a business. Written agreements between the founders should include elements of what’s expected of each other and just as importantly how any cash the business generates is divided. Taking care of this early on will form the basis of that trust when the relationship is inevitably put to the test.

A fledgling business is often subject to growing pains, that might include changes of direction or evolving ideas that will test any partnership to the limits. To stand any chance of maintaining a successful business partnership both partners should be working from the same page when it comes to their aims and ambitions for the startup.

Sometimes these ambitions may be to grow the business or make adjustments to the service, either way compromises will need to be made and opinions heard. This is why team harmony is so important, without it a business will often buckle under the strain of conflicting aims and objectives.

The Congress of European Business Angels Network (EBAN) is scheduled to be held in Warsaw, marking the first time the event has been held in Poland. The Congress is considered the largest and the most prestigious meeting of business angels in Europe and will include representatives of business angels networks, angel investors, angel investment experts and entrepreneurs, mostly from Europe, but also from the US and Asia.

The main topics up for discussion will be syndicates and joint investing by groups of angels, alternative management models, the impact of initial-stage investments upon the economy the near future of angel investing.

Russia's innovation potential is attracting the attention of European Investors but will it lead to more investment?

Dogged by corruption and instability, Russia was once regarded as a difficult place to do business, but there are signs that  times and attitudes may be about to change for the business angel market within the boundaries of this former Communist superpower.

A quick browse through the Moscow Times yesterday revealed an article about the need for Russia to improve its image amongst foreign investors. The country needs to show the world that it has a lot of pent up potential when it comes to innovation and that it is no longer a difficult place for investment in innovation.

Despite the oft-reported wealth of its oil billionaires, Russia’s VC and business angel sector is underdeveloped in comparison to major economies in Western Europe the United States and Asia. So in a bid to boost innovation in the country President Dmitry Medvedev is rolling out his modernization and innovation agenda which has seen a number of foreign VCs invited to innovation forums and conventions recently.

This may be a sound strategy to boost the number of angel investors within its boundaries, but will it really attract more foreign investment?

The secretary of the European Private Equity and Venture Capital Association (EVCA), Georges Noël, certainly hopes so.  During a conference on Tuesday, he called for Russia to convince European and American companies to directly invest in Russia.

The problem is – as most angel investors are aware – investing in early stage companies is a risky business as it is – even in advanced economies. Russia’s President may have his work cut out trying to change deeply ingrained attitudes among foreign investors on the risks of doing business in his country.

Igor Agamirzyan head of the Russian Venture Company recently spoke of a business angel boom in Russia, which according to the country’s business angels association will see the number of business angels in the country reach between 10,000 and 15,000 by 2015.

In the post credit crunch era, countries are working hard to encourage investment in innovation and encourage investment from VCs and business angels offering a variety of tax breaks as well as setting up special funds for key sectors.

With this in mind, even if Russia goes on the charm offensive it is hard to see how it will attract significant amounts of investment from VCs and business angels beyond its borders. Business angels are statistically far more likely to invest close to home even within the geographical boundaries of their own countries.

There is also Russia’s global economic competitiveness ranking to consider. The main question from foreign investors should be ‘Has Russia got its act together on the world stage?’ The indications are that it hasn’t if the recent world Economic Forum report is anything to go by.

Russia is still an economy in transition and ranks a lowly 63 for global competitiveness behind the Slovak Republic and Sri Lanka. This is because the old problems of stifling bureaucracy and restrictions on foreign ownership still persist. According to the report ‘Competition, both domestic and foreign, is stifled by inefficient anti-monopoly policies as well as restrictions on trade and foreign ownership.’ The country also suffers in the rankings due to insufficient protection of property rights and weak corporate governance standards.

However despite these findings, Russia is regarded as having high innovation potential which, if the conference this week is anything to go by, is attracting the attention of European investors. Russia’s investors have a strong track record for investing in European and US ventures, take the $200 million investment in Facebook for example, but for significant investment to be going the other way into Russia, there is clearly a need to address the shortcomings mentioned earlier.

Until then, Russia has some way to go before it realizes its potential amongst foreign investors.

The partnership hopes to double the number of top notch investors in angel groups across the country and increase annual investing by $1 billion. The Startup America Partnership is a movement – by entrepreneurs, for entrepreneurs – to help inspire and celebrate entrepreneurs, their firms and the people that join them.

The partnership was launched in January at the White House in response to President Obama’s call to celebrate, inspire, and accelerate high-growth entrepreneurship in the US. The Partnership is bringing together an alliance of major corporations, funders, service providers, mentors and advisors working to dramatically increase the prevalence and success of high-growth enterprises in the U.S.

The partners of the successful consortium, Capital for Enterprise, are AIM-listed Braveheart Investment Group, Hotspur Capital Partners, Octopus Investments, Oxfordshire Investment Opportunity Network (OION) and Venrex Investment Management. The co-investment fund will mirror a similar fund launched in Scotland in 2003.

According to  the 2010 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire, total investments in 2010 were $20.1 billion, which represents an increase of 14 percent over 2009 when investments totaled $17.6 billion. A total of 61,900 entrepreneurial ventures received business angel funding in 2010, an increase of 8.2 percent over 2009 investments, and the number of active business angels in 2010 reached 265,400 individuals, a small growth of 2.3 percent from 2009.

Entrepreneurs should be careful when they shop around for funding.

Much is written about how to attract business angels to invest in your business, but where is the advice for entrepreneurs on how to negotiate a good deal?

A visit to my local electrical store the other day got me thinking about how satisfying it can be to get a good deal, but also how difficult it can be to avoid some of the pitfalls while negotiating it.

Though I’m not usually the type of person who gets caught up in a craze, I finally gave in and decided to get myself an iPad I thought now would be a good time to invest in one, finally convincing myself that this is something I must have. I also needed a new laptop after the death of my hard drive this week. In the present economic climate I figured that going in with the intention to purchase these two items would get me a good deal, after all, both involved a significant outlay.

The problem was my attempt to confuse the salesperson was met with an equally clever attempt to confuse me. What started as a simple attempt to get a discount turned into a battle of wills and the introduction of a host of additional products I didn’t need but which were being “thrown in” to sweeten the deal. The smiling salesperson came back with what he said was “the deal of the century.”

Knowing there is no such thing, after more haggling I managed to get a further 18% discount as well as a case and some cleaner which I didn’t really need but was nice to have.

This experience got me thinking, if this is what you get in a shop how hard can it be for entrepreneurs who manage to get their idea in front of a business angel and then have to go through all the negotiating to get a good deal? For those who are financially astute and good at mental arithmetic this shouldn’t be a problem, but what if you are an inventor who wants funding to get a product to market, but who lacks valuable skills when it comes to negotiating a good deal?

Business angels will invariably want a decent piece of the action in the form of an equity stake that will eat into any money the entrepreneur will make. Many will of course throw you an array of added benefits from their involvement including mentoring, ‘the contacts to make it happen’, experience in your industry sector etc etc.  but don’t forget that like the salesperson in the electrical store, they will be looking to make a bit of money out of you and your idea in the process.

The words business angel conjures up a cosy image of someone who only wants to help, but given the risks they take with early stage companies, can these business angels really be in it just to help out? Of course not! They are little different from your average salesperson on a commission.

A quick browse on the Internet will reveal some cautionary tales about inventors who have fallen victim to greedy investors out to exploit them. One unfortunate inventor/entrepreneur managed to walk away with some investment from the online version of Dragon’s Den, fantastic! He might have thought, but having arrived with the intention of only giving away 20% equity, he left the Den after giving away a staggering 70%!

This highlights one very important skill an entrepreneur needs to be successful – the ability to negotiate.

Negotiating a good deal on everything relating to your business is essential and this includes those times when you need to source funding for your business. It is important to be single minded in your approach and not be influenced or confused by the promise of added benefits that will steer you away from your original intentions.

If you really need funding for your business you must also have enough belief in your idea to walk away if the deal isn’t right for you, whether or not it is funding from a business angel. If your business angel or group of angel investors really believe in your idea, you can and will negotiate fair terms.

Addidi was set up by 100 women who each committed £20k, giving a pooled fund of £2m to be invested via a limited liability partnership into small growth businesses. An independent investment panel evaluates business proposals on behalf of the LLP.

Crowdfunding - Will all the pieces fit together?

Crowdfunding, a model that raises funding for start-ups by harnessing the power of the Internet investor crowd has grown from similar models that already exist in the US, but Crowdcube is the first website of its kind to be launched with UK businesses in mind – will it provide all the answers for entrepreneurs who need investment?

“There is something very attractive about the concept and we at Angels Den applaud anything that makes funding more available to the masses”, said Angels Den founder,  Bill Morrow, when I asked him about crowdfunding, the Internet innovation which threatens to shake up the world of start-up financing.

However there are rumblings in some quarters that crowd sourcing for business investment may not provide the answer in all cases. There are already some business angels and entrepreneurs who have expressed doubts about having large numbers of investors involved in a single business idea.

“Making the BIG assumption that making a financial promotion to a large number of “unsophisticated” and inexperienced investors can be said to be legal [and I remain unconvinced about this, just wait for the first widow or orphan to complain that they did not understand what they were getting into] means I do wonder if having a multiplicity of investors serves the entrepreneur in the medium term.”

There are concerns that the crowdfunding concept may have its limitations for both business angels and entrepreneurs particularly where they need to be in agreement on the investor investee arrangement from the outset to make sure things run smoothly. “We have 6 investors and they often pull us in a different direction to that which we feel is right. That is their right, but in common with most start-ups this is confusing and time consuming.” explained Bill, “Having 1,000 investors, each with their own agenda is going to be a nightmare, no matter how it is dressed up.

One of the benefits of having a business angel invest, is not just about their money … they bring their experience and little black books of contacts. They want to share these and I wonder if much sense of ownership can really be had, by investing £10. Will this be enough to motivate the investor to share their experience? And even if it does, coordinating 1,000 “good ideas” will take a lot of energy.

He added “I also wonder if an entrepreneur feels comfortable telling the world about his business. There are a lot of unscrupulous people out there. Our deals can only be seen by those who have complied with FSA guidelines, even then, confidentiality is THE number ONE question entrepreneurs ask us about.”

Despite highlighting these concerns, Bill welcomes the opportunity Crowdcube could provide entrepreneurs starved of growth capital. “We wish the concept well. Given the death of the banks and the lack of Friends and Family monies it is extraordinarily difficult to find growth funding these days …. We have over 4,300 certified angels and we find it hard, even though we are amazingly selective about those we take on. Currently we reject 13 companies for every one we take on and we find that even then we still only fund about 40% of those.

Against this, should the first deal actually get funded, the social media PR that this generates will be substantial and attract professional angels to take a deeper look at it …. Maybe 1,000 people all cannot be wrong?