The first thing to realise is that not all ‘angels' have similar qualities. The selection process at the first round is particularly important. Choose proper business people - willing to invest on the basis of the proposition - over friends and family every time. Without this external qualification, there is a higher chance of losing the money of people close to you, who did not really understand what they were getting in to. If the angel knows the sector, they will be in tune with your research and help to qualify your approach.
Investors with the right background will not only bring credibility to your project but also the necessary business introductions to further add value to your investment. The early angel is accepting more risk to get more ‘bang for their buck.'
The other element I would look for is to have at least one or two angels in the mix who have started and run their own business. Angels from solely corporate backgrounds will understand how to make money from your business, but not necessarily how to create structure and run your business. Having people around you who have ‘done start-up' should also provide some steely nerves when you hit bumps on the runway.
If you can get a good set of credible angels together, with a balance of experience, your next funding rounds will be easier to achieve. You may be able to get some of these early angels to join your board and help you make key decisions. In the early days of Money Dashboard we managed to get some really supportive angels, who were able to introduce and qualify the interest of new incoming angels. They have had the requisite patience and acumen, as well as sensible and fair valuations.
In later rounds we were able to bring in a syndicated angel investment group (Edinburgh based Par Equity) who brought additional expertise, contacts and some more investment firepower as the round size increased. The UK now has a developing angel scene with many such syndicates in regions across the country. Whilst the individual angels still ultimately make the decisions, the additional layer of process and diligence is a useful stepping stone in preparing for future VC investment.
This investment type is clearly the cornerstone of the high growth economy, providing the finance and skills to kick start new businesses. As a start-up entrepreneur you should know that you are competing for money with lots of other start-up businesses and ideas. There needs to be more business ideas than money to make a capitalist economy function, naturally weeding out the companies without the ‘start-up zeal' needed to get going. There are high rates of start-up failure, so be very considered about taking on any personal guarantees over debt, thereby removing your limited company protections. But don't complain about lack of capital; make a plan of who you need to speak to, get the right introductions and get going.
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