Business Angel: How to finance startups

If the cornucopia spills over the founders angelically, then usually there is a so-called business angel behind it. Business Angel - in short also BA or company angels called - are privateers, who participate financially (at an average of 100,000 euros) in a very early stage in a startup or company and support the founders at the same time with know-how and contacts. But until startups have found such a private investor to provide them with the basic financial resources and nurture the company baby, a lot of sweat goes down the forehead. So we'll show you where to find Business Angel - and how to pick the right one ...

Business Angel: How to finance startups

Contents: That's what you'll find in this article

Business Angel: From the sky
Where can I find business angels?
How do business angels invest?
How do I choose a business angel?
Young Founder: So you are taken seriously
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Business Angel: From the sky
In contrast to venture capital companies , which focus more on growth financing, business angels are investing in startups in the very early stages - so-called early stage or seed investments . Typical of such a stake in BA are not only the small sums of money with which the business angels go (often only up to 100,000 euros, rather less), but above all the know-how that the angels bring with them.

In technical jargon, therefore, one also speaks of Smart Capital .

Most business angels do not just act as funders, but also as consultants, founders' coaches and door openers , who use their network to set up the first important business alliances.

Extrapolated, the volume of business angel's holdings in Germany alone in 2007 was around 400 million euros - and the trend is consistent. A small field. In the US, it is between $ 25 and $ 50 billion a year. There are also around three million business angels there.

Corporate Financing Business Angel VC IPO
In addition, the Angels are quite picky . With a good business idea alone does not open their casket yet. Convincers also have to convince ...

with her management team .
a clear vision .
a recognizable monetization strategy .
Traction of the product or service.
a lucrative market .
and by own financial commitment .
Anyone who just hopes that others or the business angel will shoulder the financial risk alone will generally be left out.

Then-eighth investors graphics
If all these points are correct, the questions arise from the perspective of the founder:

How can I approach such a business angel?
Where can I find my personal business angel?

We have put together the most important tips and networks for you ...

Where can I find business angels?
The Business Angels Network Germany (BAND) , a registered association and acts in this country as an umbrella organization of heavenly donors. Startups have the opportunity to submit an executive summary of their business plan. The association then forwards them to potential investors. He also organizes various networking events, giving each year the title of "Business Angel of the Year". There are also regional associations such as the Business Angels Frankfurt or the Thuringian Business Angels network . For founders all good starting points for networking.

founder platforms
These include portals like Crunchbase or AngelList , where founders can present their ideas. Crunchbase could be called an international startup database, which is edited on an ongoing basis. A good instrument to set oneself in the spotlight and thus to lure the media and investors - business angels, for example - on their own track. The AngelListbelongs to the same category, is a mix of Wikipedia and social network: creating a profile, networking, researching and looking for investors - startups can fundraise here, attract potential investors without detour. But: That does not work by itself. Without regular updates and research, the search runs in the sand.

The Startup Camp Berlin , including a pitch marathon with 26 startups presenting to selected donors, is such an event. The umbrella organization BAND, in turn, regularly organizes the Business Angel Community Summit and the German Business Angel Day - every two years in alternation. The Hannover Messe also has a startup pitch in the program. In Austria there is the Austrian Business Angel Day . And not to forget: Meanwhile even the TV evening program is a ring for founders: "The Cave of the Lions"Many young entrepreneurs have already stepped onto VOX to promote the business idea - and one or two business angels will certainly be sitting in front of the screen. There are also so-called accelerators and startup funding programs, such as the Startup Boot Camp , which is active worldwide. The application is online, ten startups are invited.

How do business angels invest?
Extra tip iconYou can address business angels at an early stage of your business. Although they carry a high level of risk, they also benefit from the strong growth momentum and the value increases at the beginning.

Some angels invest in a startup alone, others join together in mini-networks to efficiently bundle your networks, strengths and capital.

On average, the investment sum of a single angel seldom exceeds 50,000 to 100,000 euros . Larger sums of up to one million euros are rare and are rather shouldered by several angels in the composite - not least to spread the risk. Depending on the calculated enterprise value, the corporate investments are then between 20 and 49 percent. More should also not accept founders in this phase.

However, business angels do not want to buy a season ticket. Your interest and the investment period are limited. Typically, after four to seven years , Angels look for a so-called exit, where they sell their shares to another investor (or stock exchange, of course, for a profit). So to make your startup more attractive to the private sector, you should also think about possible exit strategies for the fishing rod. As a rule, this is achieved by already planning further rounds of financing in the business plan.

Participation process business angel graphics

How do I choose a business angel?
At the beginning is the focus on the own product. A brilliant idea, a solid business plan, a good presentation - that's the basic requirement for attracting a business angel. You should definitely prepare a so-called one-pager (executive summary on one page) or a so-called pitch deck (maximum 15 pages), in which you outline the key data of the company. Anyone who appears without any homework with investors looks unprofessional right from the start.

Which startups has the Business Angel supported so far? How many? Since when does he do that? What else does he do? When did he get in and out? In short: what is his track record? Get information, see references, squeeze other people over him - the time you should take, because even in the angel industry, some piers and rip off. Incidentally, these are called Business Devils in the industry . Beware of those. Tip: Never shoot money for allegedly getting one afterwards.

The chemistry must be right. A sentence made for the phrases pig, but no less true: Founders and Angels spend a lot of time together, talking, consulting, brainstorming, conferencing - over the net or face to face. Whoever does this with someone he can not stand loses his or her desire sooner or later. Private harmony has to be right - you can hear that in the industry again and again.

The world is networked like never before. But physical closeness still remains an advantage: a shared exchange between founder and angel can eliminate grievances more quickly than a round of Skype. Going to a fair together, cleaning, discussing, drinking coffee, and and and ... Sitting the fishing rod ten hours away is more difficult.

Not always the angel with the thickest checkbook is also the best candidate. Often more important is the question: how many shares and freedom of choice do I have to make for this? Here it is important to weigh up - between financing needs and room for maneuver. Perhaps a business angel who supports you in the operational business and actively helps to build a working business is the better choice.

Your business angel is optimally networked with other investors, lawyers, recruiters and marketing people. Advantage: It keeps your back free and brings it together with external experts so that you can concentrate on your core business. After all, as founders, you do not only want to benefit from your angel's mammon, but also from his contacts - from someone who is helping your startup and making you better known. Can your business angel do something like that? But also important: If a business angel has too many investments, it may not have enough time for you. Industry expertise and references in abundance do not always have to be beneficial.

On the one hand, it makes sense to focus on people who have a wealth of experience in the industry. Example: For a fintech startup Angels offer, who have already invested in other Fintechs and know the pitfalls of the industry. On the other hand, it may also make sense to remove the blinders and to address just Business Angels, who have no industry experience. Private investors are curious and enthusiastic - and crave fresh ideas. Fear of contact to industry-remote business angels are therefore a bad guide.

Searching for investors
A tip for advanced: Who already has a business angel at hand, should incorporate him as strong as possible. Specifically: He should go with him together on investor search. A household name creates trust and credibility - and increases the opportunity for future rounds of financing.

Young Founder: So you are taken seriously
Young-founder tips-seriouslyWork experience is certainly a helpful factor in starting your own business and finding investors. Nevertheless, more and more young entrepreneurs are venturing into self-employment, not least because there are much lower market entry barriers today, both technically and via the Internet. But especially young founders have to prove themselves even stronger in order to be taken seriously . The following tips will show you how to do it:

Do not let it get you down
Every founder must expect at the beginning that headwinds come towards him. For young founders this can blow even harder. Investors will advise you against your plan, tell you that you can not make it or even just declare your idea absurd and bad. If you want to be taken seriously, you should not let it get you down. Demonstrate that you firmly believe in your idea and have strong and reliable arguments for doing so - preferably numbers. If there are even first results, first customers and market interest, the ice is broken, and investors will pay less attention to your age.

Act up professionally
An appropriate business outfit, the right body language and also a professional talk, for example, when you present your business plan - all these things have a huge impact on the first impression you leave. Here you can already set the course, whether you are perceived as a serious founder with solid planning or as a young student with a dream. Of course, you should not pretend otherwise you will lose the authenticity .

Make the right contacts
You still have the experience? Then find one or two mentors before addressing investors. Benefit from the experiences that older founders have already made and use their findings for your own company and your personal career. Not only can you learn a lot, but you can be more serious when you surround yourself with successful and experienced entrepreneurs.

Use your age as a strength
Although age is often considered a weak point, it can be the greatest strength: you may understand your (young) target group much better and can use that knowledge to stand out from the competition. Or you have a critical look at the old structures and see what mistakes exist and how they can be avoided in this day and age. Make it clear that you bring fresh wind.

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