Tuesday, April 19, 2005

Attracting An Angel Investor

If your company is too young, too risky or too offbeat to qualify for traditional bank financing, you might want to look for an angel. An angel is a private investor, often a successful entrepreneur, who invests in small businesses close to home.
The following tips might help your company attract angel investors:
1. Build a strong management team.
No matter how great your product, investors demand an experienced management team. Anyone can have a good idea, but it doesn’t mean it will translate into a successful business. The ideal entrepreneur is someone who has run a business before, and someone who can do it again.
2. Find a big, potential market to serve.
Investors also look for companies that can grow quickly to meet the demands of large markets. The bigger the potential market; the more customers.
3. Create a business that depends more on equipment than people.
Most investors look more favorably on businesses whose growth would require additional equipment, not staff. Why? Because it is much easier to add hardware than to add people. When staffing and manpower is an issue, investors are more cautious.
4. Ask experienced investors or entrepreneurs to serve on your board.
Find board members who have experience and can help you with the pitfalls of raising money and running an early-stage company.
5. Write a killer business plan.
A good business plan includes a two-page executive summary and a business plan of no more than 20 pages. People with money are quite busy. They have more to do than look through a 60-page business plan. Remember: It’s the two-page executive summary that opens the door.

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