Seven reasons to seek angel investment for your business

Seven reasons to seek angel investment for your business

Posted: Mon 22nd Oct 2018

If you're looking for investment in your company, you might have considered going to angel investors. Enterprise Nation member Adria Tarrida discusses the benefits of getting them on board.

You're probably familiar with the BBC TV programme Dragons' Den.

The Dragons are angel investors, i.e. high net worth individuals who makes use of their personal disposable finance to invest in equity of start-ups and early stage companies.

And they are not alone. The UK Business Angel Association (UKBAA) represents over 160 organisation and around 18,000 investors!

There are several reasons why you would want to seek angel investment over other types of finance. Yes, you will be giving some of the equity in your company away, but it might be well worth it for the following reasons:

It's less risky than a loan

Angel investment comes without pressing monthly repayments. Also, you don't need secure it with personal collateral. In the unfortunate case that your start-up is not successful, the angel will lose their investment.

They know it full well, and that's why they'll be looking for opportunities that could provide them with a big return. But as an entrepreneur, the lower risk vs. a loan is a big advantage.

It makes you focus

You'll need to provide a sound pitch deck, with a clear, single minded strategy that shows a realistic growth in your customer base and profits.

The fact that this will be heavily scrutinised by experienced investors will make you consider all the possible challenges they'll throw at you, forcing you to clarify your vision and ambitions.

Investors will give you valuable feedback

Even if they don't invest in your company, they'll tell you their reasons. Perhaps you overlooked an opportunity, perhaps your team is not strong enough, maybe your financial projections are over ambitious.

The reasons could be many. But keep in mind that a lot of angels have decades of business experience. Be humble, take the feedback onboard, adjust your business pitch and keep trying!

They will provide validation of your business model

Related to the previous point, it's possible that you were wondering about your strategies. Is your go-to-market plan going to deliver? Are you spending enough money in marketing?

The experienced voice of a business angel will validate or negate your strategy. While reassuring, also keep in mind that 'no battle plan survives contact with the enemy'.

It will give your business exposure

A lot of Dragons' Den participants just go on the programme to get exposure. At a smaller scale, talking to lots of potential investors will give your business exposure. Who knows what opportunities could come out of it!

Angel investment can be 'smart money'

You will have seen it on Dragons' Den; one of the business owners is targeting a particular Dragon, sometimes even rejecting investment from other Dragons.

That's because they're looking for 'smart money'. Not only the big cheque, but also someone who can mentor them, offer connections in the industry, open the door to clients, suppliers, distributors and even help with recruitment for key positions in their company.

Think about this when you're researching who to pitch to and target the Angels that will give you competitive advantage in your sector.

Angels tend to adopt a long-term view

Some have dubbed angel money as 'patient money'. Angel investors will stay, on average, eight to 10 years with you before expecting an exit. They understand the nature of business and will be patient to reap their benefits.

So how do you contact business angels?

A good starting point is your personal and professional network and the UKBAA directory which you can filter by type of investor, investment range, sector and region.

Next steps

If you're an Enterprise Nation member, connect with other members who might be investors or have experience working with them using the People search. You can also find experts who can help you build a good investor deck.

Enterprise Nation has helped thousands of people start and grow their businesses. Led by founder, Emma Jones CBE, Enterprise Nation connects you to the resources and expertise to help you succeed.

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