View Mobile Site
zone code Advantage Code _
 

Ask the Expert

Signal Photos

 

Steve Tannehill: Tips for finding angel capital

Entrepreneur’s Corner

Posted: November 16, 2011 1:55 a.m.
Updated: November 16, 2011 1:55 a.m.
 

Accessing capital remains an important need for many of the small businesses served by the Small Business Development Center hosted by College of the Canyons.

In addition to the core program providing resources to all small businesses, the SBDC offers a number of focused programs that target specific industry sectors and demographic groups. 

For instance, the Advanced Technology Incubator program focuses on providing access to resources unique to early stage, high growth potential companies. 

While some of the assistance those companies require is different from many of the already-established companies we serve, including access to capital and marketing, there are also some unique solutions available for these startup companies.

One capital source uniquely available to the companies through the ATI program is angel investors, a funding source that falls after “friends and family,” but before venture capitalists and banks. 

SBDC advisers who focus on early stage high growth companies have created these tips for accessing angel investors:

Understand angels
Angels are private investors or groups of investors who invest in small businesses.

Venture capitalists generally provide professional management and investment of other people’s money, where angel investors are generally groups of high net worth individuals who meet as a group to assess investment opportunities.

Angel investors, many of whom are successful entrepreneurs themselves, generally decide individually whether to invest in a particular company. 

There are many networks of angel investors in our area including the Maverick Angels, the Pasadena Angels and the TechCoast Angels.

Determine your fit
Angels generally are looking for early stage high growth companies that offer the opportunity to provide a significant Return on Investment (ROI) within two to five years.

Angels often fund companies in the early stages, before they are ready to qualify for bank loans or venture capital.

Know how much capital you need
This applies to any capital request. If you can’t clearly articulate how much capital you need, what you are going to use if for, and how you are going to pay it back, you will almost certainly be turned down by your funding source. 

Angel investors typically fund anywhere from a few thousand to a couple million dollars.

However, for early stage high growth companies that need more, venture capital firms are generally a better source of capital.

Be prepared to give up some ownership
Since angels generally provide funding in the form of convertible debt or in exchange for an ownership stake, you need to be comfortable with sacrificing some equity.

Demonstrate potential
Because they make riskier investments than a bank or lending institution, often funding early stage companies that are not yet profitable, angels expect a significantly higher rate of return.

You must be able to show how your business will make money and how the angels will benefit, while presenting a clear exit strategy.

Pinpoint the right angels
Angels often focus on certain industries. You can improve your chances of success by targeting angels that specialize in your type of business.

Socaltech.com lists more than 50 angel investors in the Los Angeles, Santa Barbara and Ventura county area.

Tech and biotech, medical services and appliances, green products and services and social media tools are all popular industries for angel investment right now.

Use all your resources
You never know where you’ll find an angel, so search both online and off. Socaltech.com is a good source of local angel investor companies.  Capital conferences, referrals from business contacts, and the SBDC are good resources as well.

Show your management strengths
Unlike Venture Capitalists, who may replace your management team, angels often pick their investments based on a good management team already in place.

Instill confidence in the angels by demonstrating your team’s expertise and credibility.

Be prepared
When you make your presentation to the angels, be ready with a clear, concise pitch and a well-thought-out business plan.
Also use the meeting as a chance to understand the angels’ approach and build rapport. 

Be willing to learn
In addition to capital, many angel investors provide resources, contacts and advice based on their industry experience.
Don’t miss out on the advantages this valuable knowledge can provide.

Angel investors look at a lot of opportunities before finding one they like, so if you’re interested in angel investor funding, be prepared and willing to talk to a number of angel investor groups. 

The process will be highly instructive and help you clearly define your business, your business plan, and your growth process.

If you have the right business and find the right angel, it can provide you with the capital needed to take your company to the next level.

Steven Tannehill is the Director of the Small Business Development Center (SBDC) hosted by College of the Canyons. Mr. Tannehill’s column reflects his own views and not necessarily those of The Signal. For more information about the SBDC please visit www.cocsbdc.org or call (661) 362-5900. To make an appointment with an SBDC business advisor please email sbdc@canyons.edu.

Comments

Commenting not available.
Commenting is not available.

 
 

Powered By
Morris Technology
Please wait ...