Angel investor networks were formed to benefit both the entrepreneur seeking capital and the wealthy individuals interested in making investments in early stage or start-up companies. The angel investor networks can be easily found by entrepreneurs; they normally have a mailing address, a telephone number, contact name and a website describing the group’s activities. These angel investor networks help an entrepreneur in finding angel investors easily. Membership in some of the groups can cross 100 people.
Using established venture capital firms to raise equity investment is just one way of getting business funding. Finding a private investment from an individual angel investor is an alternative but may be harder to arrange. Online investment and angel investor networks may be a solution worth considering.
An investment angel is an individual that invests their own cash into other businesses in return for an equity stake. An angel works very much like a regular venture capital firm and sometimes is even referred to as a venture capital angel investor. However, angels generally work alone or in a small partnership. Businesses looking for this kind of private investment may find that hooking up to an online investment or angel investor network may be a good way to speed up their search for funding.
Many times investor angels already have a wide network of contacts, so they do not have trouble finding business investment opportunities. In fact, they usually enjoy staying off the radar of the mainstream so they can choose the sources of their deal flow. An angel investor network provides an ideal way to increase deal flow rapidly. Networking with professionals like bankers, attorneys, and accountants may provide additional deal opportunities as well.
The angel investor networks members certify that they are accredited, which means they must meet certain income and asset levels. However, there is no checking whether or not that investor actually has those assets.
Angel Investor Networks bring together businesses and angel investors. The aim here is to allow a business that is looking for an equity investment to advertise this fact to investors that may be interested in a deal. Some angel investor networks work on a localised basis; others work nationally or even globally.
The ways that online angel investor networks operate may vary. Some run a purely Internet-based introduction service. A website may, for e.g., allow a company to post up a business plan/proposal or details of the investment they need. This will then be available for the site’s investor clients to see and, if they are interested, the two parties can arrange to start talks to see if a deal can be done.
Other angel investor networks may also use specific investment meetings to bring together businesses and investors on a regular basis. This would allow a company to pitch for funding on a face-to-face basis at a networking meeting as well as to use any online connection services that are on offer.
Many angel investor networks operate this way; the entrepreneur sends an executive summary through the mail or by online submission. The angel investor network has a committee that screens the submissions and invites the most promising ones to either submit a complete business plan for review or make a face to face presentation to the group at lunch or dinner meeting, followed by a question and answer session. A committee may be formed to perform the in-depth due diligence on the company and make a yes or no recommendation to the membership as a whole, who then vote on making the investment.
The process can work efficiently for the entrepreneur. The angel investor networks often tutor the entrepreneurs on how to make an effective presentation and prepare them for the tough questions they will be facing. Instead of trying to meet angels daily and get each one to agree to invest, the entrepreneur can obtain all the start-up capital they need from one source, the angel investor network.
The Advantages Of Using Online Angel Investor Networks:
Finding individual private investors can be difficult unless a business owner has the right contacts. Joining a network can:
- Help access angels that the business may not have known about before.
- Find private investors with a declared interest in their sector, business stage, location or funding need.
- Help a business get site advice on how to put together proposals and presentations to maximise their chances of investment.
- These advantages can make this a viable alternative to finding equity investment funding independently.
– The disadvantage of using online angel investor networks:
There are often costs involved with using an online networking solution. Charges made by these sites may be levied at various stages during the introduction process. Depending on the services on offer a site may charge a fee to:
- Join the network.
- Connect with interested investors.
- Attend networking events.
In addition, some angel investor networks may charge a percentage fee of any investment that is made. Owners should check out a few online investment and angel investor networks first to assess potential costs and options before deciding to take this route. This process can, however, make it easier for some business owners to raise equity investment. Those that decide that giving away a stake in their company is not for them may want to look at debt financing business loans instead.
The major drawback to angel investor networks is simply one of numbers, because the angel investor network is visible in the local community, it is contacted by a number of entrepreneurs annually. Your main issue is competing with all the other entrepreneurs around you and sometimes, the angel investor network is not as open as it appears, or says it is. Some do not review any companies that were not sponsored into the angel investor network by one of the angel members.
Some angel investor networks charge a fee to present. Their reasoning is that the fee shows the entrepreneur is serious about their company. The angel investor networks explain that the fee covers the cost of processing the application, making copies, and other office expenses. Angel investor networks can really prove to be sent from heaven for the entrepreneurs looking for private investors.