Have you seen ABC’s Shark Tank? This could be your life, or maybe it already is.
The show offers entrepreneurs the chance to present their visions in front of a group of potential investors. It’s a chance to grab the proverbial gold ring of small business: Financial backing: Someone to invest in your dream, someone who will put their money behind your idea to help your business grow. Yes, it can be done — even without the help of network television.
Angel investments in the first half of 2011 topped $8.9 billion, up 4.7 percent from the same period in 2010. Some 26,300 companies got angel financing, with the average angel investment amount being $338,400 per company, according to the Center for Venture Research at the University of New Hampshire.
“Historically angels have been the major source of seed and start-up capital for entrepreneurs, and this return to seed and start-up investing is an encouraging sign,” said Jeffrey Sohl, director of the center.
To win investment backing, or angel money as it is sometimes called, a small business owner needs vision, tenacity, and sometimes a little help from the Internet (more on this later).
Know Your Game
Angel funders are putting their own money on the line and they want to see that you know what you’re doing. Before going out hat in hand, articulate a clear and precise vision of what your business is, what it does, how you intend to do it. Write a coherent and professional business plan that you will be able to present to potential investors.
Who’s in Charge?
Angels are investing not just interested in your ideas. They will look closely at the top leadership, seeking an out the kind of experience and expertise that will give the business legs for the long run. A demonstrated track record of success will go long way toward easing their minds.
Ultimately, investors want to see a way out. That is the point after all: To achieve a return on their investment. What is the exit strategy? Will they own shares in the company? Will the company grow with an eye toward an eventual sale? This question of return on investment has got to be addressed in order to draw in outside capital.
Where’s the Money?
Angels are everywhere, but it can take some looking to find one. The search starts close to home, through networking among family, friends and business acquaintances. Just getting your name out there can help get you in front of the right people.
Professional contacts also can be a help. Lawyers and accountants often may be willing to link up entrepreneurs with clients who may have an interest in small business investing.
In the same way, an expert recommendation can help to open doors. A university contact, or even a top executive from a firm in a related field, may be able to affect an introduction to a potential investor.
While pursuing these real world strategies, entrepreneurs can also take advantage of a number of online forums designed specifically to connect small business owners with potential funders.
One such example is RaiseCapital.com, an online community that affords small business owners the opportunity to put their ideas, and their specific capital needs, in front of a group of investors who already have shown an interest in funding small businesses. The site boasts 5,100 registered investors and asks a one-time fee of $99 from entrepreneurs who wish to list their opportunities.
GoBigNetwork.com claims to have generated millions of dollars in funding by connecting 300,000 startups with more than 20,000 investors. This site is rich with support features including how-to help and live chat. Those interested may search the database for free, although contact is for paid members only. Membership starts at $59 per month
At Go4Funding.com investors can search through potential opportunities, while small businesses can post their particular capital requirements. Business owners can lay out the very specific nature of their enterprises (one recent listing touted Helicopter Agricultural Aerial Application and Tour Rides) or float ideas for possible ventures (“Looking for potential partner for my web-based business idea”). It is free to post a listing or a small business owner can get more visibility with a featured listing for $25.
Is there a caveat? Of course. Investors will be scrutinizing you, but you’ll need to scrutinize in return. It is crucial to know where your money is coming from and who is backing your business. You need a reliable partner, one with a proven track record of success. Ideally, your investors will give you not just cash but also expertise. They should be available to help steer you as your business grows.
Despite what many business owners may believe, a bank loan is not the only way to get your idea off the ground. The money is out there, for those willing to get out there and look for it.