Angel Investment Network - Angels on the Fairway

I am often approached by people asking about companies that might be interested in some angel investment. Sometimes the request is from a successful entrepreneur looking to relive the heady early days of their own start-up, without the huge personal risk and long hours. Or, it might be a successful business executive interested in something more fun, nimble and fast-moving than their own process-driven environment

Either way, my first advice is that they should be sure that they do not particularly care about the money they are considering investing. These should not be funds set aside for their children's education, their retirement or that house abroad they have always dreamed about. This is money they should be quite prepared to lose; angel investment is notoriously risky, and the chance of their losing everything is significant.

Nevertheless, the overall experience should be fun; even a failed investment should be seen as a worthwhile exercise and a good learning experience, even if it did not ultimately succeed in the way that they had originally hoped.

My next advice revolves around their own personal goals in investing in a particular start-up, specifically their desired role in the new venture. Few entrepreneurs are looking for completely passive investors; most are looking for someone who can add enthusiasm, expertise and contacts to the venture, without going so far as coming in every day and interfering.

Overall, I suggest that a potential investment should pass 'The Golf Club Test'. This is a metaphor of their going to their local golf club or other social gathering and regaling their chums with exciting tales of the new adventure. They should not only be able to explain simply and precisely the features, benefits and target market for the company's products and services; they should also leave the club with details of potentially interested customers.

Entrepreneurs sometimes have an uneasy relationship with their angel investors. They enjoy the initial investment and hopefully should agree with most of the advice they receive from their new mentor. Of most practical value are warm sales leads, particularly friends and contacts of the investor who might be willing to try them out, perhaps for a suitable discount in the early stages.

If a potential angel investor does have some expendable funds, the right motives and a good personal network of potential customers, there are many places to find potential investments. The more traditional angel organisations have now been supplemented by several on-line angel networks, where business plans can be perused and evaluated before meeting the entrepreneurs at informal 'speed funding' events.

The Angel Investment Network has 30 networks worldwide covering over 80 countries in Europe, North America, South America, Africa, Asia and Australasia. After an initial contact fee they charge no additional fees or commissions, as the entrepreneurs deal directly with the investors.

Co-Founder Mike Lebus advises potential investors in the early meetings to focus their due diligence on the entrepreneurs themselves rather than the business ideas. Ideally, they should have the right expertise and motivation, as well as the crucial ability to build and work with a team. There are many good business ideas; what differentiates success from failure is the entrepreneurs' ability to execute successfully.

The company should also have a realistic valuation based on facts rather than dreams. The numbers should stack up both in terms of the business plan itself and the lucrative exit strategy for the investors.

Above all, investors should like the entrepreneur personally and really enjoy their company, so much so that they might even consider introducing them to their well-heeled friends down at their golf club.

URL : http://www.ft.com/home/uk

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