27.11.2009 21:56:53

Investors Network Team

I've been involved with a number o f businesses and finally I've found the the recipe for success when investing in start-ups

Veteran entrepreneur and now business angel shares his experience on getting his kicks from investing in new businesses.

For me, there's nothing like it--the excitement of seeing a business rise up from nothing. I can't even explain the feeling. There's just something unbelievably thrilling about seeing the growth, watching the numbers go up, getting the business to stand on its own. I've done it myself a number of times, and I can't get enough of it.

And now I'm having the same experience with David's business. I'm seeing it all unfold through his eyes. I see the same spirit, the same perseverance. I know exactly how he feels, coming home at night, not being able to sleep, thinking, "Oh my God, 145 meals! I broke a record!" You can't wait to go back and set another one. It's incredible. It's the greatest feeling in the world.

It's also one of the greatest payoffs you can get as an investor, or so I've realized. Yes, making money is important. I wouldn't go into a deal unless I thought I could get my capital back and earn a good return. But I really don't do this type of investing for the money anymore. I'm more interested in helping people get started in business. Whatever I make is a bonus on top of the fun I have being part of it and the satisfaction I get from helping people like David succeed.

I wish only that I'd figured out how to play this game sooner. It's taken me 25 years and a lot of bad deals to get it right. Not that there weren't opportunities to make money along the way, but somehow they got screwed up. Even when I did make some money, I seldom felt good about it, and I never had much fun. Something always came along to spoil the experience.

In the process, however, I developed a few rules of angel investing, which I've finally been able to bring together in one deal. They may not be right for everyone, but at least they've allowed me to find what I've been looking for all these years.

 

Rule 1 ?Invest in people who want your help, not your money

If I'm going to invest in a new venture, I want to play a role in its success. I come in as a partner, and I expect to be treated like one. Not that I want to run the business or make the key decisions, but I like my opinions to be heard. That means investing in someone who wants to listen. The problem is, people always come across as good listeners when they're asking you for money. So I prefer to give my financial support to those who don't expect it.

 

business angels | Angel Finance | business investors | business investment | angel investors

09.10.2009 18:22:50

Investors Network Team

Once the business plan has been finalised, the first stop considered by most new businesses when looking for Business Start-up Capital (banks), Angel finance will normally be the next port of call. Despite this fact, few entrepreneurs really understand what Angel investors look for and expect from businesses in which they potentially may invest. The fund raising process is becoming ever more competitive and being able to meet investor requirements the first time around will increase your likelihood of raising the capital you need.

After a recent Bos Beraad, mostly attended by angel investors, the issue of what Angel Investors look for in companies that they fund and what the various processes they go through when assessing entrepreneurs was discussed.

Most of the investors present agreed that the recent economic down turn resulted in them re-assessing the way they both look for and asses the businesses they get involved with. This does not mean that they are not still very actively looking for investable businesses. As also discussed in a number of previous meetings it was obvious that most investors seem to have a clear goal of how much they wanted to invest each year and what the returns were that they expected from their investments.

Angel Investors typically invest anywhere from R200,000 to R2 million, preferably in a first or second round funding, for which they normally will acquire around 15-30% of the company depending on the structure of the deal. The Angel Investors are often successful entrepreneurs themselves who are able to offer significant strategic value to the company in addition to the financial capital that they are providing. All the panellists agreed strongly that the strategic value that they can provide is often times more important than just the financial capital.


What do they look for?

business funding | angel investors | Business Start-up Capital

18.09.2009 19:02:17

Investors Network Team

Recent research in the UK suggests that Angel investors will be key to economic recovery. In the UK, as in South Africa, entrepreneurship and small business forms an important part of the national economy. Angel investors play an important role here when it comes to business finance. With banks around the globe being much more choosy when it comes to investing in businesses, entrepreneurs and small firms increasingly opt for alternative finance from angel investors.

The report reads: 

business angels | Angel Finance | business investors | business investment | angel investors

16.09.2009 13:57:51

botes

Being involved with entrepreneurs and business investorsbusiness investors on a regular basis now for almost a decade, it’s clear that although the financial and business landscape changes constantly, Investors needs don’t. Speak to most of the angel investors, micro finance providers, venture capital firms and entrepreneurs who have taken part in successful negotiations for gaining business investment or providing the same they will all tell you the same thing. When meeting with potential investors, if you are an entrepreneur who wants to walk away with a positive agreement you will need to have done or produce at least the following three things.

Market research
Market research at a very basic level will tell you if those who you think will be your clients are interested in your product or service. Irrelevant of how exited you are about your business idea and how many of your friends and family have shared your excitement with sympathetic nod and grin, if you have not spoken to potential clients who have said they will be happy to part with their hard earned cash for your new product, the simple fact is that you simply don’t know.
What is that you want to know at this stage?
Are your potential clients interested in your product?
How much will they be prepared to pay?
What about the product appeals to them?
Where will they look for your product or buy it?
Where do they currently look for similar products?

Investors will be interested in the information you have produced during this process. If they are new to your industry then positive responses here is what will give them confidence.

Know your numbers
The numbers behind your business is what investors are listening for while you are talking about your dreams and vision for the business. Costs are important. Will you be able to cover your costs to start with? How will the production costs – if it’s a manufacturing business and staff costs and other overheads when it’s a service based business effect the eventual price of your product and more importantly will there be enough leverage there to allow for a healthy profit. Investors are listening for information to tell them that the money they are putting in will be coming back with interest. The higher the risk you are asking them to take the more attractive the return will need to be.

Business evaluation
The final bit of information that they will be looking for is the valuation of your business. If they are asked to part with their cash for a stake in your business then what is the size of the stake that you are giving away. Be realistic with your valuation. For a new business the valuation can be based on the potential indicated by the market research, information on competitors and that they have created, other issues such as pre-orders generated, patents and the size of the market. Once ht business has been trading it will be much easier to value it as trading figures, assets and actual amount of clients can be used. When it comes to evaluation this can be used to negotiate with investors but going in with to high an evaluation to start with may loose you any chance of a deal to start with.

With banks becoming more risk averse in recent times, business investors have become a much more attractive option for many entrepreneurs. If you are an entrepreneur looking for business investment, make sure you have done your homework by the time you get to speak to investors.

angel investors | business investment | business investors

03.09.2009 11:08:32

Investors Network Team

For many entrepreneurs, the availability of business finance plays an important role when coming up with new business ideas. Is your idea fundable? Will you be able to find a venture capital firm, business angel, bank or financing institution to support the business plan financially. This may not be the very first thing you think of, yet in the end it may be one of the telling factors when choosing to move forward with a specific business venture.

Before looking for business finance, you may want to consider the following. Using the latest in business plan software will help you to do manage a number of these processes automatically:

Do you need more capital or can you manage existing cash flow more effectively? 
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for  money under pressure. 

How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives. 
In what state of development is the business? Needs are most critical during transitional stages. 
For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs. 
What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.

Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods. 
How strong is your management team? Management is the most important element assessed by money sources. 
Perhaps most importantly, how does your need for financing mesh with your business plan? If you don't have a business plan, make writing one your first priority. All capital sources will want to see your business plan for the start-up and growth of your business.

Not All Money Is the Same

angel investors | venture capital | business finance

28.07.2009 20:14:59

Investors Network Team

We were recently looking at a number of business plan presentations and the one presentation specifically looked like a real opportunity. Unfortunately, the presenting team was making one of those typical  errors while presenting to us: The presentation was entirely focused on the product and nothing what soever was said about the company itself.

Whats your point you may be wondering? Despite the good presentation, we could not help but think of who the company is, do they have other products, in what position are they to bring the product to market. Who is the management team, do they have the people to make this happen? It is one thing to present a great idea, but quite another to bring the product to the stage where it is selling. Do you want investment, or are you looking for the knowledge backup and support also?

Investors invest in companies, not products. A great product is obviously an important place to start, don't get me wrong. But the industry outlook, competitive space, management team, financial model, sales channel, pricing structure, etc. are all important to the equation. Make sure to spend a balanced amount of time on all of the aspects of company building, not just the how great a product you can build. If anything strays from the standard Investor formula, be prepared to spend more time defending it. Business investors don't mind moving away from the typical entrepreneur-Investor relationship, but remember that if you are asking for both investment and time, you  will need to spend more time justifying why it makes sense.

business plan | investors | VC | angel investors

14.07.2009 10:18:26

Investors Network Team

Business Investors are either individuals or businesses who invest in new or growing businesses and business plans. Apart from investing their money, these investors often also choose to contribute their own skills, experience and contacts to the business in order to increase the probability that the business may be successful.

Although a business investors may seldom have a connection with the company prior to investment, they often have experience of its industry or sector. Once involved in the business, the investor will be fully committed to seeing the business through to success. If you consider your self in this role, you may find it obvious that if you invest in a business, you will do what ever it takes to make sure you not only get your investment back but also see an increase in the amount invested.

The majority of Business Investors make investments for financial reasons. However, there are also other motives for investment, for example,  taking an active part in the entrepreneurial process, and the enjoyment from being part of the success of a good investment and the sense of putting something back in.

Business Investors are an important but still under-utilised source of money for new and growing businesses. A typical Business Investor makes one or two investments in a three-year period, either individually or by linking up with others to form a Group of Investors. Some Business Investors invest more frequently.

Will the Business Investor be right for your business?

As with all relationships, it is important that you meet with potential investors first. Investors are also just people, and the relationship between you and your investor first and foremost needs to work.

 

Typically, Business Investors invest between R100,000 and R10 000 000 in an investment. Where larger amounts are invested in a business, this may be as part of a Group of Investors organised through personal contacts or a Business Investors Network.

Business Investors invest across most industry sectors and stages of business development, but especially in early- and expansion-stage businesses. Most prefer to invest in companies within reach of where they live or work. Investors in technology companies tend to be more prepared to travel longer distances.

What do Business Investors look for?
The methods used by Business Investors to decide which businesses to invest in varies greatly, however, the following issues are all taken into consideration:

• The expertise and track record of the founders and management
• The businesses competitive edge or unique selling point
• The characteristics and growth potential of the market
• Compatibility between the management, business proposal and the business Investor's skills and investment preferences
• The financial commitment of the entrepreneur

What to look for in Business Investors?
The company must also ensure that the business Investor is willing to invest in them is right for their company.  Before signing an agreement the business must ensure that:

• The management team and the business Investor are compatible and will be able to work together.
• Business Investor’s skills match the companies needs
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What is the next step in seeking Business Investors?
The best place to find a South African Business Investor in through Investors Network. I suggest you join our community and find the best one for yourself, this will most probably be judged on their location, business Investors tend to invest locally, or their specialisations.

What are business investors | angel investors | sa business investors