Shopping for Angels
Angel Investing can be a pretty confusing business. To get a little advice on shopping for angels, Kipp caught up with Carl Simmons, co-author of ‘Every Business needs an Angel.’
November 28, 2010 3:45 by Eva Fernandes
Shopping for Angels: The temptation to sign with the first person who writes you a check will seem irresistible, especially to the first time entrepreneur. But try to resist. Your relationship with your angel is going to be long-term and you need to ensure that the two of you share a similar vision. If your angel is looking to buy and sell within a year, or take the company public whereas you are keen on taking the company to the next level, there is going to be a lot of tension and conflict that could have been avoided. So take your time when you are shopping for angels. In order to reach that level of comfort and get a true partnership, meet as many as you can before you sign with one.
Best Angel: The best angel is one who will not only provide you with sufficient start up cash, but will also help you develop your business using the advantage of their extensive network, or by helping develop your sales channel. If all that the angel is bringing to the table is cash, he’s probably not worth it. In terms of involvement, the ideal angel is one who will help out but not dominate the running of the company.
Due diligence: Be prepared for questions about due diligence, and be ready to offer as much information as you can about the arrangement. Be sure to be as thorough as you can with your angel and ask him as many questions till you feel comfortable.
Pick your terms: Too many people get fixated on a number; the young entrepreneur is likely to have a set amount hammered into his brain of how much he wants to raise and how much he wants to own – often without even speaking to investors. But let go of the fixation; it is more important to pick the terms than to pick the exact numbers. For instance, focus on what the exit strategy in place is: upon leaving, who gets paid first and how much?