Why are they not using their own extensive network of contacts and if so, why are they not receiving these small amounts?
An Entrepreneur can improve their chances of raising funds if they can prove they have protected any IP and patents and can prove they have a partly proven concept through initial revenue, a first contract, however small, or a reasonably documented expression of interest from a well- recognized company.
In addition,
the IP and/or patents must belong to the company and not the individual Entrepreneur.
The Entrepreneur should have shown previous commitment to the development of their business idea by at least having given up a good job and invested some of their own money and/or time in the early stages before searching for additional funds.
There are many Angel investment opportunities in start up companies to develop a website or product/service idea, where the company has pulled together a group of experienced directors, but have put in no funds and where some of the directors are likely to have reasonable wealth when you look at their stated past business experience. I personally will not invest in these start ups, as I believe these directors should put in some risk capital, rather than just their past business experience.
The Entrepreneur needs to immediat ely demonstrate to the Business Angel that they fully understands the market place they are operating in, that this has been properly researched, what niche their business proposition fits in and that they know what the direct and
indirect competition is. I often find that Entrepreneurs have not properly researched the competition and tend to gloss over this due to their self-belief and enthusiasm.
The Entrepreneur and their team should have reasonable salary and benefit expectations as in the early stages, despite Angel investment, the business should be run on a “boot strapped” basis. Ideally, remuneration should be in the £30,000 to £50,000 range for the leader of the enterprise in London, and less in the Midlands and North as living costs are so much less. I personally will not invest where expectations are above this sort of level.
Following on funds from this,
investors will want to see that the Entrepreneur is allocating the
towards Angel
capital expenditure, marketing and PR, rather than overhead costs.
Where the Entrepreneur requires a large sum of money, say £1m and above, it will be wise that the Entrepreneur is willing to accept installments to be made over an agreed period of time. This will be particularly important where there are one or two Angel investors, who will want to see the benefits of a first tranche of money.
Lastly but not least in importance, it always helps if the Entrepreneurs business is eligible for the tax benefits of the HMRC Enterprise Investment Scheme, which does exclude certain types of business (
www.hnrc.gov.uk/ eis) known as “EIS”.
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