Who's The Ideal Angel For My Business ?

Obviously someone with money to invest and who can afford to lose his/her investment. But it's not just a matter of having money. Angels generally are or were entrepreneurs themselves or who have business and management experience as a company executive. Being an angel is often ideal for someone who, say, has sold his/her own successful business. They may not want to return to the long hours and headaches of running a business, yet enjoy the idea of investing money and giving advice to someone who may have a potentially lucrative invention or concept. Angels may choose to take an active management role, perhaps just sit on the board of directors, or let a venture-capital firm or investment manager monitor the investment.

The importance of chemistry between an entrepreneur and an investor cannot be underestimated. This is a relationship that will help forge future directions for the business. Both components must work well together. Angel investors have differing agendas that they bring to their investments.

Whatever type angel fits your needs, some issues which should be settled up front are:

• What is their background, expertise, connections, experience, and credibility in the same market as your product or service?
• What kind of value can they add in addition to their financial support?
• How involved do the investors want to be? Be clear about what the company needs and doesn't need, how and when the angel will help with such tasks as negotiating bank loans, checking out candidates for acquisition and recruiting senior managers.
• How do they feel about dilution of interest? For example, if the company needs more money and it raises money from other sources, it waters down the original investors investment. It might be reasonable to give the angels an option to put in more money to avoid this dilution.
• What is their time frame for exit?
• Do they want to be bought out for an appraised value?
• What is their ability to help get second round financing?
• What are their expectations financially?
• What are their goals? Are they in consonance with the goals of the business?