Where Angels Fear to Treadby Lesley Francis on 09/10/13
We have been called a “ragtag army”, “quasi-professional investment syndicates”, “Godsends” and a “pain in the butt” but one thing is for sure – Angel investing is here to stay. Bridging the ‘equity gap’ has always been a challenge for entrepreneurs. When they have exhausted funds from savings, friends and family, bank loans and credit cards but are not ready or right for venture capitalist funding then angel investing is often the way to go.
Looking at it from the perspective of entrepreneurs, there are some clear advantages and disadvantages to seeking angel investing which are often reported to us. The following summarizes comments Ariel Southeast Angel Partners have routinely received over the years of working with a range of start-up and early stage businesses:
• “You are a lot more flexible than most funding routes – we can get the smaller amounts of capital we need with reasonable business agreements and we don’t have to worry about high monthly payments and fees”
• “I came looking for money and I got real business expertise – your insights and experience have been an unexpected bonus for my business”
• “Because we did not have a solid track record of success yet, traditional funding routes would not touch us – you were prepared to dig beneath the surface, steer us and invest”
AND THE CONS………
• “You were great in the first round but when it came to follow on investments, it was much harder to raise the capital we needed”
• “I was hoping that we wouldn’t have to give away as much equity as we did to secure the investment”
• “I was surprised by the level of involvement you wanted to have with us going forward – I knew there would be a level of reporting – which is reasonable - but it took a bit of getting used to having one of ASAP on our board”
So, seeking Angel investing isn’t for every entrepreneur. ASAP, like many Angel groups, prides itself on the quality of our due-diligence processes. But remember, we position ourselves as partnering entrepreneurs, not acting as an ATM!