What are the characteristics of an angel?
Various surveys and research reports have yielded some interesting characteristics for identifying business investor angels. Although the exceptions probably all over rule the norm, the profiles provide some interesting food for thought: More than 90% are male.
oTypical ages are from 40 to 60 years old.
oThey generally hold masters or multiple advanced degrees.
oThey have prior startup experience.
oThey have personal incomes between $ 250,000 to $ 1,000,000 a year.
oThey invest at least once a year, with an average of 2 1/2 times a year.
o They invest $ 25,000 to $ 50,000 per deal, totaling hundred and $ 130,000 a year.
oThey seldom take more than 10 percent of the deal.
oThey seeks a minimum of 20 percent compounded per year return.
oThey expect liquidation in 5 to 7 years.
oThey have a strong preference for manufacturing deals.
oThey like technology that they're familiar with.
oThey prefer startups or early stage companies.
oThey dislike moderate growth.
oThey like to play a consulting role, board of directors / advisors.
oThey like to invest with other sophisticated investors.
oThey like to invest close to home (within 50 to 300 miles).
The primary investment motivation is a high rate of return. Secondary motivation is capital appreciation. Angels learn of investment opportunities from associates and friends. Less than 30 percent see and refer investments that they make to their own investment peer network. Contrary to venture capitalists, angels do not rank comprehensive business plans at the top of their criteria list. However, they rank management ability the highest, and seek a clear, demonstrated market need, plus a large market potential for the product or service.
Typical questions investors will generally ask
The business owner should try to imagine the investors' point of view. After all, it is their money that is at stake. Investors have certain concerns and expectations that must be addressed if the prospectus and the offering circular are to be favorably received. Angels typically work from a business plan, not a prospectus, since a prospectus or private placement memorandum generally does not have the forward-looking statements that a business plan has. Ambition and an optimistic outlook are important to the success of an offering, but investors tend to be skeptical of promises that sound too good to be true. The most obvious question being, "Can these guys do what they say they can?" The prospectus is, in many ways, a sales brochure, too. But, for legal reasons, it should also be an accurate account of the company's progress and development. If the entrepreneur is going to do a DPO (an offering done without a stockbroker), that is, ask people he has never met before for money, then a prospectus is necessary.
Below are some of the most common questions investors expect to have answered within a prospectus or a business plan. All of these questions are addressed in the U-7 form (the legal form used in a securities offering) as well as other commercially available software templated business plan packages.
oWhy did you start your company?
oWhere do you see your company going?
oWhat problems do you see your company encountering?
oWhat do see as your company's main markets?
oHow do you plan to capitalize on those markets?
oWho is your competition?
oHow do you plan to handle your competition?
oWhat have you invested in the company?
oHas the company met its projections?
oHow did you arrive at your financial projections?
oIf the company has not met its projections, why not?
oWhen do you expect to meet the projections?
oWho does your accounting?
oWho does your marketing and advertising?
oWhat is your company's short-and long-term business plan?
oWhere you see the company in five years?
oIn ten years? (note this kind of forward-looking statement may not be allowed in certain states under an offering).
oWhat are your criteria for site selection?
oWho is your customer?
oHow many employees do you have, and what do they do?
oWhat additional personnel do you feel will need to be hired, and when?
oWhat is your overhead?
oWho are your suppliers?
o Do you have long-term contracts with your suppliers?
oWhat is the value of your company, and how did you arrive at that value?
oWhat are the amounts of your loans payable?
oHow does the company plan to use funds from this offering?
oWhen do you think your company will need financing, and how much?
oWhat is your company's "system"?
oHow does that system differ from your competitors?
oHow do you view the role of the Board of Directors in relationship to the company's management?
oDescribe your employee benefit plans.
oWho is in charge of research and development?
oHow is research and development conducted?
oWhat is the stability of the company?
oHow are your expansion plans going?
oHow many stores do you plan to open this year?
oWhat are your hours of operation?
oWhat is the rent on your present office space?
oHow long is your lease?
oWhat is the seasonability of the company's business?
oWhat type of growth have you seen in your industry?
If your trying to raise money the odds of you raising money from an Angel living in your community are much better. Most entrepreneurs do not have the high quality connections and contacts to Wall Street and the Venture Capital Communities around the nation. Loans are professional financiers may more likely live near Silicon Valley, New York, or Boston. However, the Internet is here, that means it is easier for you to find angel you need on-line. Through the power of the Internet it is now much easier to find these people through various on line capital matching services or websites dedicated to capital formation for small business.
