Angel Investors and Other Resources
By Matthew Deutsch
There are a number of resources available to you beyond individual investors. Typically, angel investors do not work with business owners and businesses that do not have that much experience. Timing plays a crucial role as it pertains to the potential of a new business. However, you should be careful not to spend an exorbitant amount of money on lists that contain the names of individual funding sources if you are seeking private financing from an investor.
It is important to consult with your CPA as it pertains to varying financing and funding methods. Private investment via the usage of a private placement memorandum is often necessary if you do not qualify for debt capital. You should review all legislation that may impact your business as it relates to finding outside capital. As we discussed before, is extremely important that you have a certified public accountant working with you when you’re seeking capital from an outside funding sources as they will prove to be an invaluable resource as time progresses. Entrepreneurship is the fastest growing new field of study in American higher education due to the poor economic climate.
Statistically, only about one in every 250 deals is financed by venture capital firms, and this is why many people turn to angel investors. When you’re working with an angel investor, in most instances, you will typically know this person beforehand prior to them investing in your company. Provided a business meets certain criteria, a multitude of programs for counseling as well as financing are available from the SBA. You generally cannot advertise your company to the general public as it relates to your capital raising activities. You should take the viewpoint of a type of third-party funding source when you’re drafting your business plan for a venture capital firm, angel investor, private equity group, or outside funding source. If you business is profitable then a SBA loan may be a better fit for you as it relates to your capital structure.
Generally, these private funding sources want their investment to be no more than 50 miles from their homes as they are going to want to check in on their small business investment. You should have a potential outside funding source on a confidentiality agreement as it relates to business operations. Investors are going to want a significant amount of control of your business, and this should be taken into account when you are working with a private capital source.
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