The relationship between investor and entrepreneur is like a marriage but one with a planned divorce - here are 20 things to consider before tying the knot!
Start the process of relationship building well ahead of when the money is needed;
You should undertake due diligence on the company prior to deciding to invest;
Entrepreneurs can also undertake due diligence on you, checking your record of support or otherwise, so be prepared for this;
You should commit to a non-executive director or advisory role but not an executive role;
Make sure that every contact with a company addresses the top three investment criteria in some form;
The best exit is a trade sale for cash…it usually maximises value for all shareholders;
The revenue potential of the company must demonstrate a scalable business that is capable of producing significant returns for you;
The best business plans have a great executive summary – the point of an executive summary is to succinctly sell the investment opportunity, not to just describe the business;
A compelling and fully costed business plan is essential;
It is important that the company's management team understand and be on top of the numbers;
Investors rarely want to 100% fund a business and will take comfort from other funders;
Founders should have ideally had made or intend to make a cash equity investment in the company, i.e. have ‘skin in the game’;
Have a realistic valuation expectation – entrepreneurs have to be incentivised;
An equity deal is not just about the headline valuation;
An apparently unattractively high valuation can be mitigated by a liquidation preference;
When considering an investment, you need to take into account any potential future funding rounds and the effect that may have on your ultimate shareholding and returns;
Whilst there have been many successes by individual investors, participating in an angel syndicate can have significant benefits; and
Syndicates need to be well managed to take advantage of the benefits and mitigate the pitfalls; the best syndicates use a charter.
The most likely outcome of any one angel investment is failure. However studies show, overall, business angel returns are enhanced by using a portfolio approach to investing;
It is important at the outset for you to decide how you determine success;
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If you‘re a high potential Start Up that has a new innovative product or service ready for commercialisation and/or have achieved some early traction and are raising finance to scale internationally please contact us.