Sunday, July 22, 2012
Sunday, July 22, 2012 by Ben Botes · 0
Tuesday, January 31, 2012
As an investor hoping to get involved in a new business opportunity or simply invest in a viable business plan it is crucial that you do your due diligence on the opportunity that you are investing in. But this is of course not the only consideration. Understanding the industry, the market and of course the people in the new business and ensuring that you feel comfortable with the elements are also of the utmost importance. Here we look at a few additional steps to take and issues to consider before you make the important investment choice.
Research: Whether you are a beginner or have an experience in making business investments, a thorough research is very important and the foremost prerequisite. It could get real frustrating at times for you to select the right opportunity out of those hundreds other business opportunities that may not be legitimate. There can be different kinds of franchisee businesses that may look worth investing, but may not be advisable. It is always very important not to skip any detail while doing a research on the possible investment opportunities.
Background Verification: If you decide to contact a company with an interest for investing into their business, you should not miss out any important questions that could be relevant to the business. For example, knowing the possible span of the contract period and exact figures that you need to invest for a particular business are helpful for finding the suitable business investment opportunity. You must also check different business bureau websites that provide information about the legitimacy of companies and businesses you might be targeting. It would be really helpful to know if a particular business or company has any legal complaints and lawsuits against it.
Reference Checking: Before taking any decisions on business investments, you should always refer to certain reliable sources, such as taking advice from people you can trust, consulting family members who are into a business, or other successful investors who have experienced into franchisee business.
Hall of Commerce: To invest in the local market, a wiser way to proceed would be to consult the local hall of commerce, which is present in almost every city. You get an opportunity to consult with other successful businessmen and business organizations as to how to start and grow a new business and to learn investment tactics. Moreover, local businesses or groups watch out for interested investors to help them expand their existing businesses.
Investment Advisor: If you are a beginner into this field, choosing the right business investment opportunity can get real risky if you do not have an expert investment manager or advisor. An investment manager can give expert opinion about specific business investments based on your requirements and affordability. Knowledge about business investments is a significant factor in choosing the right opportunity. It is therefore advisable to always hire an investment manager before joining the bandwagon of new business investors.
An ideal business investment opportunity can also be helpful to enter the global market. If you are already an investment expert and can bend your priorities well to match the international market, you can also consider investing on some international businesses. You can find information about investing into global markets from various Internet sources.
As always, the list is of course almost never conclusive. Yes the owner of the business, his business plan and track record would give you plenty of indications on weather his business is for you but in addition to that trust your gut, ask a trusted friend or colleague for their opinion and make sure you have a strong affiliation with the business that you are getting involved with.
Tuesday, January 31, 2012 by Ben Botes · 0
Thursday, November 3, 2011
With angel investment being more popular than ever and an increasing amount of entrepreneurs looking to attract the right angel finance with their business plan, as an angel investor you will know that the right business plan only comes along so often. Of the many angel investors I meet, one thing is clear amongst almost all an that is the need for more effective business plans showing better potential and understanding of the market. Too many entrepreneurs limit their opportunities by writing weak business plans. Great ideas are common; much rarer are businesses with the people and products to enter a market and make a real impact or dominate.
But apart from ensuring that the businesses they are identifying spend sufficient focus on market research and te development of effective business plans, the angel investor also fulfills a range of other roles. At the end of the day most angels have been there and done it before. They know what success looks like, what the obstacles are to look out for, how to get past these and importantly, the kind of commitment needed to ultimately succeed.
Companies don’t build themselves. People build companies. Ultimately, an angel investor is selecting a management team. A great team can make even a mediocre company achieve reasonable success, whereas a company with the best technology will not be successful with a mediocre management team.
Always be on the lookout for opportunities to help the startup. An angel often has industry networks that can be great sources of valuable information. Entrepreneurs can become so focused that they do not realize major trends are shifting or simply do not have time to network appropriately if they are deeply involved in product development, for example. Angels can be the eyes and ears of startups, and angels can help find good potential employees through social networks. Angels can also find other angels and venture capitalists for further rounds.
Diversify your risks by investing smaller amounts in more startups. Angel investments should be less than 10% of your portfolio, due to the risks of potential losses. The portfolio approach is key: estimates suggest that angel investors lose their investment in one-third or more of the companies they fund. Set aside at least the same amount you invest in a startup so you can make follow up investments in future rounds. This will allow you to retain your percentage ownership or at least mitigate its dilution.
Fund deals that you’ve shown to venture capitalists who have indicated they will fund future rounds if certain operational goals are met.
Angels who lead the due diligence process and sit on a board on behalf of other angels should be compensated with a small percentage of equity. The best board members are angels with relevant operating experience, not those with the deepest pockets.
Do not overcontrol the entrepreneur. There is a reason why the entrepreneur has started his or her own company: he or she prefers to run the show. Even though an angel has provided capital that does not give the angel the right to wrest control from the founder, except of course if the business is not meeting its operational goals.
Angel investors provide significant value to the overall economy by fueling entrepreneurial activity. Angels are distinct from venture capitalists and, although the demarcation line is blurring, angels continue to be the true initial investors in great ideas.
Without angel investment, the entrepreneurial landscape certainly will be poorer in more ways than one. But as with business itself we need to continuously strive to be more effective at what we do and how we do it. Taking some of the responsibility for the success for the companies you are investing in as the investor certainly is one step we can take to move towards a more effective relationship between entrepreneurs and investors.
Thursday, November 3, 2011 by Ben Botes · 0
Tuesday, November 1, 2011
One of the main reasons an entrepreneur will be approaching you with their business plan and off you a stake in the business is t get you involved. This is especially true for early stage businesses and new entrepreneurs. These businesses want you to get involved. They are looking for your experience and contacts as well as your investment into the business. Angel investment is much less about investing your money and waiting for a high return and much more about getting involved.
Yes of course no entrepreneur wants you to interfere so drastically that they feel both intimidated and out of place in the own start-up. But getting involved with he right attitude can benefit both the business and of course you with your investment.
Investing in a company as an angel is an intimate affair. You commit only after a thorough due diligence process evaluating the potential success of the idea. You evaluate the talent and drive of the founding team. It’s about people, and the company comes to hold a special place in your heart.
Traditional investments like stocks? They’re just a ticker symbol in a chart, affected by powers far-removed from your own.
Right? Isn’t one of the best things about angel investing that you get to participate in how well your investment turns out?
It’s Not Just Your Money They Need My ideal vision of an angel deal incorporates something much more than money. Forget about being a “passive investor”. That’s just as boring as a mutual fund.
When you put your money into a company, hopefully it’s partly because you feel it can benefit from your experiences in business. So you’ve grown 2 online companies through strong search marketing and sold them? That’s awesome, and you should be finding companies that can benefit from that experience.
Of course you’re not necessarily going to come in and be the CMO. But the 1 email per week you can give your entrepreneur could be worth R1 000,000 to the bottom line. The one answer per week that you can provide about a tough marketing decision could make all the difference in the world.
Go With What You Know It’s only natural for people to be drawn to things they understand. In angel investing, that means you’ll likely gravitate towards companies that mirror your own past experiences.
That’s a good thing! Take your money and your advice to places where it’s mostly likely to be useful. I’m not about to invest in a pharmaceutical manufacturer, but I’ll jump all over sleepapnea.com.
Remember – You Can Contribute The “passive” angel investor annoys me, especially if he/she bemoans the poor performance of their investments. If it’s your Energizer stock, that’s one thing. If it’s the R50,000 you put in 2 angel deals in 2008, well do something about it. I’m sure your entrepreneurs are open to ideas, help, connections, and insights. Getting your hands dirty an only be a good thing.
Make sure that you get involved with the type of personality that will enjoy getting you involved. someone who is not protective over their own business plan to such a level that they are not open to learning and benefiting from others ideas.
Tuesday, November 1, 2011 by Ben Botes · 0
Wednesday, October 19, 2011
Wednesday, October 19, 2011 by Ben Botes · 0
Tuesday, October 4, 2011
There are countless articles out there about how to find angel investors, and how to turn business angels into the ticket your business idea needs into the big time. Have you ever considered, however, what scares business angels and angel investors away?
In this article, we look at sure-fire ways to scare business angels and angel investors away, so that you can avoid them when you are pitching.
1. No Business Plan
Again, this is an offshoot of our tendency not to take angel investors seriously. We think of them as a friend, rather than a business partner and too many people make the mistake of giving them a half baked business plan, or none at all.
An angel investor may meet with you on the golf course rather than in a boardroom, but good business angels are also shrewd business people, and they will want to know that you have a solid business plan. Make sure that yours is as good as you would offer a venture capitalist, and you should be fine.
Remember, it is better to be overly formal, and give your potential angel investor too much to work with, than it is to miss out on the deal of a lifetime because you did not bother!
2. Treat Them as Anything Other Than an Investor
Too often, we think of angel investors as something other than a ‘real’ investor. We all seem to think that because it is a less intense relationship than you would have, with say, a bank, they are something other than a fully-fledged investor.
However, think of it this way. The money they are going to put into your business is real, so the investment is as real as any other is. If your relationship is casual, that is fine, but always remember that while it is okay to be friendly, you are still dealing with a bona fide investor in your company.
3. Overvaluing Your Business
Often, you believe that you have a multi million-dollar idea. You decide to offer your potential angel investor twenty percent of your company, based on this future valuation of your business, and the deal falls through.
The reason is simple: while you see your business as having the potential to earn millions, your business angel is looking at what it is now – and probably thinks that something closer to fifty percent is fair compensation for risk.
No one wants to give away more of their business, but think of it this way: without your angel investor, you probably do not have a business, and while it hurts to sign away a sizeable chunk of that potential company, you have to consider that 100% of nothing is still nothing. Sometimes, you have to negotiate with what you have now, in order to secure the future.
4. No Exit Strategy
We entrepreneurs tend to get caught up in the here and now. We are so excited about our idea, and the potential it has to change the world, that we forget that most business angels do not want to be involved with start-ups forever.
Most angel investors want a clear-cut, documented exit strategy in place, so that they know that in five or ten years, they will get their investment back, plus a tidy profit.
Consider whether you will list your business, sell it, whether management buyout is an option, or anything else, and make it clear to potential angel investors that you will be giving them a way out of the deal after a definite time period has elapsed.
Think About Their Fears
Angel investors are a special breed. They often invest in companies that no one else would consider putting money into. They have an appetite for risk that makes them the perfect partner for start-ups, and they are usually the light at the end of a very long, very dark financing tunnel!
Make sure that you put yourself in their shoes before you pitch your idea, and identify any potential fears they have. Then do your best to allay those fears and you might just find that a business angel is your start-ups best chance at the big time after all.
Tuesday, October 4, 2011 by Ben Botes · 0
Monday, September 26, 2011
If you have heard about business angels, and you are thinking that an angel investor sounds like just the ticket to take your business from idea to business plan to reality. However, there are some cases where an angel investor may not be the best thing for your business. Here are a few things you should consider before you jump right into a deal with the first business angel who says yes.
Do You Really Need the Money? The first question you need to ask yourself is whether or not you really need money from an angel investor. Most of us fall into the trap of becoming all starry eyed when a business angel offers us money, but unless you genuinely need the capital, it may be better for your business if you at least tried to go it alone, and bootstrap your company. Remember that most angel investors will want an equity stake in your business, and while that’s a good deal if you need to raise funds, and have no collateral, giving away chunks of your company for no good reason doesn’t make good business sense!
Are You Being Used? It may sound like something out of a mafia movie, but it is not unheard of for less than scrupulous business people to use small businesses to launder funds, or for other illegal purposes. Be very wary if any potential angel investor wants to invest cash in your business, or if they invest using a convoluted process that involves shell corporations or anything else that makes you suspicious.
Remember that if you are associated with an angel investor who turns out to be involved in dodgy dealings, you will automatically come under suspicion too, and it could potentially spell the end of your business, even if you are not guilty. Try to remember that due diligence works both ways and that while you are being evaluated and looked into by your potential angel investor, you should be doing the same with the potential investor.
Are You Willing to Have Someone Looking Over Your Shoulder? Ideally, from the entrepreneur’s perspective at least, the angel investor is someone who considers your idea, takes a small stake in your business, hands over funds, and turns up at quarterly shareholder meetings. However, in reality, there are plenty of angel investors who are much more hands on than that.
Many of them are established entrepreneurs and business people themselves, and that means that they generally have lots of experience and knowledge to share. While it can be great to have a seasoned veteran on your team, who takes and active role in your business, it can become a nightmare when you find yourselves clashing, or if you take on an angel investor who doesn’t know enough about business, but feels entitled to be involved in decisions because it’s their money you’re working with. This should not deter you from looking for an angel investor if you genuinely need financing, but you should make sure that you have all the details about involvement in day-to-day decision making or running your business ironed out, and on paper, and you should be fine.
Angel Investors Are Great – Most of the Time The truth is, in the vast majority of cases, angel investors ARE the answer to your prayers. But in a tiny minority of cases, they are not. As long as you are cautious, and not blinded by the possibility of getting the money you have been chasing for so long, you should be fine. Treat it as you would any other business deal, and funding from a business angel CAN be the best thing to happen to you.
Monday, September 26, 2011 by Ben Botes · 0