Financing your bussiness

If your business is too new, too risky and unproven, orwork. Be sure to dedicate enough time and budget in
too offbeat to qualify for traditional bank financing andyour search for financing.
attract venture capitalists, you may want to look for anOnce you find a prospect, send a letter requesting a
"angel." Although the figures vary widely, angelshort meeting to discuss the proposal. A more
financing is believed to provide billions of dollars ineffective approach is to be personally introduced to
capital to entrepreneurs every year.the angel investor by a common friend. People are
If your company is too new, too risky and unproven, ormore inclined to be receptive to offers from other
too offbeat to qualify for traditional bank financing andpeople if the request come from people whom they
attract venture capitalists, you may want to look for antrust.
angel. An angel is a private investor, often a successfulIn the event that the prospective angel shows interest
entrepreneur, who invests in small businesses close toin your business idea, make sure that you have
home for a variety of economic and personal reasons.prepared a well-researched detailed business plan.
Usually, angels are friends, relatives, or colleagues.Your plan should emphasize why you need additional
Successful entrepreneurs, especially retired ones, arefinancing and exactly what you plan to do with the
especially likely to become angels.money. Write an executive summary for the plan that
Although the figures vary widely, angels are believedspells out in one page why someone should invest
to provide billions of dollars in capital to entrepreneursmoney in your business. Explain too, how you can
every year. Based on demographics, studiesrepay the money and when. Better yet, have
characterize angels as follows: They are wealthypresentation materials ready based on your business
They are usually self-made as opposed to inheritedplan in order to have a more effective discussion with
wealth Is usually in their sixties; almost never belowyour prospective investor. You want to appear
forty Angels prefer to invest in companies they arerelaxed, confident and knowledgeable as possible.
familiar with. They usually seek out small and growingIf the investor is interested, bring in your lawyer and
companies in their own industry.accountant to the negotiations. Informal investors
How do you find an angel for your business? Here areusually invest from $10,000 to $100,000 in each venture.
some tips: 1. The first place to look for is among yourWhile angels may be able to invest considerable
business associates. You have a greater chance ofmoney in your venture without requiring the kind of
securing financing from people who knows you. Thendocumentation that other investors do, put your
ask your business associates to ask theirarrangement in writing to reduce misunderstandings.
acquaintances. However, the farther the relationshipAngels may prefer to make straight loans at rates
and the lesser the prospective angel knows you, thecomparable to banks or slightly higher rate. They
lesser the chances of securing the investment unlessgenerally expect to lend their money from three to
they have a unique understanding of your product.seven years, with some guaranteed exit provisions
2. Network, network and network. Join a professionalsuch as mandatory buy-out.
organization or trade group for your industry. BeginOthers may want to be repaid in stock if your
attending meetings on a regular basis. This is the bestcompany eventually goes public. Be sure to tailor the
way to get acquainted with successful businessfinancial arrangements to fit your angel's needs.
owners in your field.Angels can also provide you, not just with money, but
3. Stay local. You don't need to go beyond yourguidance, advice and a mentor relationship. Also called
geographic area to find investors willing to take their"advisory investors," they are generally not interested in
chances with your venture.controlling the business, but may require you to meet
4. Discreetly inquire about people who appear to becertain business goals or follow certain business
the most successful members of your industry. Pitchpractices. If possible, encourage your angel to become
the idea to your lawyer or accountant - they may bea member of your informal advisory board. Many
interested or know someone who could be interested.angels like to keep a close eye on their money; plus,
They may have clients who frequently invest in a newthey can offer you invaluable advice. If your angel is
and growing business.well connected in the local business community, he or
4. Research on the Internet. Some sites provide listingsshe may help you find additional investors, introduce
of angel investors per geographical location, whileyou to a banker or an attorney, or bring in new
others provide focused advice on getting investors forcustomers. An angel may also help you gain
your small business. Check out the following sites:membership in a club or professional society that will
vFinance Directory of Angel Investors: http:/benefit your business.
www.vfinance.com International Angel InvestorsRemember that every relationship is different. The key
Institute: http://www.angelinvestors.org Venture Vortex:to success is doing everything you can to increase
http:// www.venturevortex.com However, the rule isyour angel's comfort level so the person's investment
always to raise money at the right time. Convincingand relationship with you and your business will be
angels (or anyone else) to part with their cash tolongstanding and profitable.
support your venture takes a lot of time and hard