Company Partners News

New Business Angels use both head and heart to make investments

8th Jul 2010

Business AngelsBusiness Angels are adding to their numbers by an influx of new private Investors seeking to get better return rates on their money.

With the Bank of England base rate remaining at 0.5% for a record 15th month, stock market uncertainties and worries about a "double-dip" affecting property prices, there's few investment opportunities available of any merit.  

Potential Business Angel Investors are however seeing that through funding growth in small business ventures, they can get good returns and there are still some tax advantages to be had with the Enterprise Investment Scheme (EIS).

New Business Angels do need to remember to use their head, as well as their heart, when making investment choices, so it’s worth noting a few guidelines for sound business investment:

   1. Invest in areas that you understand and have experience of, your knowledge & contacts will be worth more to the business and you will understand the risks better

   2. Be interested in the business area, get enjoyment from the activity, you’ll then be happy to put the time and effort into the business

   3. Do due-diligence
      - check that the people you are talking to are who they say they are
      - credit checks are easy now days to obtain
      - check thoroughly yourself the financials of the business, or use an accountant
      - examine all claims (market size, patents, etc) to ensure they are correct

   4. Choose entrepreneurs who are realistic, know their market/business well and with who you feel you can have an open working relationship

   5. Do your own investigation of the market potential, look at competitors

   6. Weigh up how much time you will have to spend in the business – does it fit your time available?

   7. It can take longer for a business to be a success (average 6 years), than to fail (less than 3 years), so plan accordingly

   8. Make sure that your overall aims for the business and use of the investment are in sync with the entrepreneur

   9. Agree the respective roles and responsibilities of yourself and the entrepreneur (would you be a working Director, or non-Exec) – agree who would do what.

 There are additional issues that a Business Angel would want to cover before making the investment. Discussing the right choice of equity and/or debt. Agreeing the value of the business and so the equity. Having the exit strategy clear helps and finally putting in place the partnership/legal documentation.

By doing the basics right, the new Business Angel Investor will be in a better position to judge a sound and workable investment.