Most people see Business angels as those lucky types with enough cash to consider investing in early-stage businesses. If you’re looking for a third party to inject cash into your business, the first question you have to ask is: how much ownership of the business are you prepared to give up?
Ben Botes, co-founder of a South African based business planning and growth consultants, SA Business Plans, comments that: ‘Many businesses look for debt finance in the first instance. But the bottom line is that if you don’t have assets, you’re not going to get any finance.
‘Business angels tend to be seen as the last option because people are reluctant to give away any equity. But you have to be sensible and ask yourself which is better: owning 100 per cent of nothing or 50 per cent of something that’s worth R10 million?’
Speaking to investors
Rob Joubert, founder and managing director of Contact Center http://boomerangsa.com/, speaks about the importance of being clear about what you want from your investors. He says: ‘I managed to get seed funding for my first company but had to part with 20 per cent of the equity in the process. Two years later, we were in a position to buy the shares back.
‘Early-stage funding can be a useful source of investment for a number of reasons. For instance, if you sell a stake in your business, it means that everyone has a vested interest in seeing it perform well.’
Grow your business
Penny McCarthy gave up a 35 % share in her business on when looking for both business groth finance and know-how of how to effectively grow her business. The financial backing and advice along the way has helped McCarthy get her kids toys and story book range into a well known consumer chain recently. ‘I should have taken this step ages ago,’ she says.
‘Now it’s about clarity and moving forward. The main thing I have to do is keep my focus and drive. I started full of pasion and nothing was going to stop me from making this dream a reality - I have to continue in that way,’ she says.
Another consideration is to regain full control of the company. ‘Who knows, I may even buy back my shares from the Investor. The buy back option was part of the original agreement between myself and the angel investor – it was a key requirement for me as I have worked hard to get to where I was and did not want to give that up in the long term,’ says McCarthy . ‘But then why should I want to do that? Peter McCarthy is one of the greatest guys I’ve ever met.’
Who are business angels?
The experience and expertise that an angel may bring to your business can be invaluable, although many prefer to be hands off (otherwise it could interfere with improving their golf swing). According to Joubert, the typical angel is 45 to 65 years old, has taken early retirement and is looking for a bit of excitement.
So if you are a small or growing business looking for start-up or business growth finance, why not find a business angel and give your business dreams a real boost.
