What are angel investors and how can they benefit you?
Whether your business is just starting out, looking to expand or struggling but still full of potential, there are times when all you really need to make things happen is a helpful injection of cash. This could mean taking out a loan from a bank; it could mean remortgaging your house; or it could mean seeking the aid of an angel investor. Chosen well, angels can not only help you out financially, they can also give your business a boost in other ways.
Angel investors
Angel investors are people with money, usually gained through successful business ventures of their own, who are looking for small businesses to get involved with. Leonid Boguslavsky can be a good example of this definition. People like him often provide valuable expertise as well as finance – because, of course, once they’ve invested they have an interest in you doing well. They can also help you with networking and if they are well-known then their reputations will instantly increase your business cachet.
Types of investment
The simplest form of investment involves you parting with shares in your business in exchange for cash, with the angel hanging onto these in the expectation that as your business grows they will increase in value. An alternative is sale of stock from which the angel can expect to receive a regular dividend, and in many cases they will also seek a position on your board of directors, acquiring a say in the direction you should be taking. The degree of control they have in this situation is something that will need to be worked out during your initial negotiations.
Case study: Mikati M1
Taha Mikati, shareholder of M1 Group, is a billionaire who made his fortune in telecoms and who is known for his skill as a strategist. Also working with Investcom, he has a specific interest in developing markets and in small businesses looking to expand there. He takes a close personal interest in the projects he invests in. With a background in civil engineering, he’s the go-to person for large scale electronics infrastructure projects.
Getting it right
Any deal made with a business investor has to work both ways. This means that you need to have a well written business plan and know how to sell your ideas. It also means that the angel you choose will have to be right for you – and there is quite a bit of variety out there. Finally, you have to have the right deal – one that will be comfortable for both parties over the long term. As a rule, angels don’t require you to be making big money to begin with but they do need to see that you’re creative, not too sentimental and genuinely prepared to work hard. They’re usually drawn to those with common interests, so keep this in mind and do your research before you pitch.
Developing a good relationship with an investment angel can make all the difference between a good idea and a real business success story. Don’t be afraid to investigate the offers that could be available to you.
