It’s a recession and everyone’s broke, right? Well no actually. You would be amazed at not only how much money is out there, but how you can go about getting it.
I had the pleasure of learning a few tips, tricks and stats from funding expert Bill Morrow (www.angelsden.com)
The average sum invested in a business is £213,000 for 18% equity
Bill Morrow co-founded Angels Den, which is the largest funding platform of its kind in Europe. It facilitates both angel investment and crowdfunding. Angels Den has over 6000 active Angel Investors on the website, all of whom are looking for much better returns than a bank can give them, and thousands of entrepreneurs who are all looking for investment. 140 businesses with good ideas seek investment every day and 1-4 of those businesses are successful. Whilst small sums are just as welcome as large, to those thinking money’s scarce you will be amazed to learn the average sum invested is £213,000 for 18% equity (which sounds a lot healthier than the deals offered on BBC’s Dragons Den doesn’t it?) and £16 million has been invested so far.
A salary for the entrepreneur is also built into the ‘runway’ of the business which isn’t somewhere planes take off. A runway is the amount of time a business can operate in the red before it fails.
It’s fun, not profit that is the main reason an Angel invests
So why opt for angel investment? Bill Morrow says that profit-focused banks are no longer offering unsecured loans, sizeable or otherwise. Whilst Angels however obviously want to make money, profit is not their primary focus. Profit is in fact their third main reason for investing. Coming above that is social contribution and coming above that as their top number one reason for investing is fun and entertainment. To put that simply the business that you are currently sweating buckets over may well be the exciting new thing that gets Angel Investors bouncing out of bed in the morning. They are looking for things they can get passionate about and people they can get passionate in. They are looking for people they can hang out with and whose company they can actually enjoy. Angels on average make their money in their late forties and then invest 8-9% of their liquid assets. As part of their return for their investment in you they want an adventure.
Would have been nice to know that before you spent months crafting your business plan wouldn’t it?
Angels never focus solely on the numbers
And yet we spend months agonising over them. Apparently most men take 5 months to craft their business plan and women 8 months (lets leave the jokes about women being 38% more conscientious for another time!). And – brace yourself – more staggeringly it takes most Angels only 2 minutes and 12 seconds to read it. What’s more, in those 2 minutes and 12 seconds it takes an Angel Investor to read your business plan they never focus solely on the numbers. This is because Angels know that any speculation about future cash flow is at best foolish and at worst totally deluded. What they want to do instead, as mentioned before, is invest in a person and team whose idea has validity and stability.
Know your business, tell the story of your business and definitely prove your business
Expressing the validity and stability of their idea – let alone expressing the validity of themselves – is where many entrepreneurs fall down. Bill Morrow says that 36% of entrepreneurs fail to express their business idea in clear and simple terms and if you cannot convey your message you cannot convert potential investors. Equally many entrepreneurs fail to prove their business model and to have proof of it over time. Many more, like those blindly murdering songs on X Factor, are oblivious to their poor choice of product.
So if that’s what makes you fail when pitching Angel Investors what helps you succeed? Check Part Two to find out: https://www.phoenixfm.com/2013/12/19/is-there-really-any-money-out-there-funding-tips-from-bill-morrow-founder-of-angels-den-part-two/
Information from a seminar conducted by Entrepreneurs In London www.entrepreneursinlondon.co.uk