Looking to Grow? Ask Your Angels.
Taking the next step for your small business will probably necessitate an influx of cash from somewhere. It takes most businesses a while to turn enough of a profit to actually grow or expand organically – and chances are, you’ll have to look outside your organization for those funds.
That’s where angel investors come in. Angel investors typically deal in relatively smaller amounts of money, investing $25,000 to $50,000 in small businesses. The question for your business is deciding if working with an angel investor is the best move for you.
Angel investors can be a bit tricky to define since the relatively small amount of money they deal with means a larger amount of people could qualify as an angel investor.
For a small business looking for a push in the right direction, getting that injection of cash can prove to be the difference between becoming highly successful and folding. Amazon, Apple, and many other massive businesses can thank angel investors for allowing them financial momentum, so you’ve got some pretty big success stories to look to if you’re choosing to go with one.
But, since most small businesses, by definition, are risky due to their high failure rate, angel investors can drive a hard bargain.
Many angel investors work deals that include clauses that give them a level of control: whether that be of how the money is spent, or even in actually running the business. If you’re not careful, a $30,000 investment in your business could end up costing you some of your autonomy as a business owner.
Angel investors also want you to have every i dotted and t crossed. Make sure you have a great and organized business plan, and that your business is organized and running smoothly - angel investors are assuming a lot of risk, so they’ll turn you down even for a small amount if they don’t believe that you’re in a position to be successful.
Be careful who you work with and read the fine-print when engaging in talks with a potential angel investor. It’d be a good idea to work with someone you trust; someone you know believes in you and your business.
If that’s not possible, and you need to look for an angel investor, consider talking with your local chamber of commerce. Chambers of commerce usually know the local landscape pretty well, and can point you in the direction of a local entrepreneur or investor that could turn out to be your angel investor.
There’s also the Angel Capital Association, a group that compiles and lists local investors that are in the business of angel investing. Again, do your homework and be careful.
These experienced investors will not dole out cash to you unless they know they’re in a deal that’s bulletproof for them.
Don’t get yourself into an agreement that will end up costing you down the road more than the influx of cash will allow you.
If you’ve got a promising and organized business, and negotiate from a place of intelligence, an angel investor can be a difference maker for your small business.