by Jacoline Loewen
If you are feeling down about your business fortunes, keep in mind Cirque du Soleil, Ernst & Young’s Entrepreneur of the World. Not bad for a former street performer, Guy Laliberté, who walked on stilts across Quebec asking for money to get his business going. Guess what – people gave him cash.
If you want to grow your business, keep Guy in mind and watch those entrepreneurs who have the guts to go on Dragons’ Den. They made the decision to get a professional financial partner, even though they may just as well get a bull’s eye painted on their butts for Kevin O’Leary to kick.
But this is the risk: reward – payoff or humiliation of life as an entrepreneur.
Besides the Dragons, who are the Angels? Angel Investors come from a wide variety of backgrounds and careers. They love business and want to share this passion for information technology, manufacturing, alternative energy, finance, services areas, etc. Angels will bring $250,000 to $500,000 in capital, their skills, and the sheer joy of helping your company. In addition, at the early stages, so much of business is who you know and angels can introduce you to their large networks, getting you in front of the right people to grow your business.
Angels will assume financial risk that would send your average banker screaming for cover. At the toughest time of the business, angels usually get involved, often before there are even a few clients. The money at this stage is unsecured, which means there is no building to claim. The angel is lucky if there is anything to recoup.
There is also no registered claim on assets, which leaves the assets unencumbered in case the owner needs to get debt from the bank. In other words, your company has a positive bank balance and no debt owed because the angel is part owner of the business putting in capital. The more equity you have, the higher your ability to get loans – banks are comforted that you have $500,000 in the company and will lend you more.
Angel investors: Who are they?
The first angel or individual willing to invest is probably your mother or other family member. Your parents may give you the money as they think, “This will be good for our boy, Billy.” But Jane Austen said, “Business, you know, may bring money, but friendship hardly ever does.” I’m with Jane; it’s better to get a professional partner.
This category of investor probably sold their business to Telus and now have money to burn. The one thing to know about these angels is that they are not ready to retire. Some corporate angels may be thinking about how to get your business sold off to the first interested company, making them risky. At first, they seem like a saviour, but morph into Agent Smith in dark glasses, shoving you down a Matrix highway. Google their past company investments. Are the companies still around? Are the founders happy?
The Retired Executive Angels
They love the challenge of business and are an old war horse – give him a whiff of the battle of getting a business up and running: it stirs up his blood to get back in the game but without the day-to-day responsibility.
The Old Money Angels
There are wealthy families looking to fund companies. They sometimes give away money to achieve something philanthropic at the same time. They support pet interests. Social Capital – run by Bill Young, a family member of the founder of Red Hat – funded the start-up company called Evergreen that focused on hiring at-risk youths and supporting the development of the new Toronto neighbourhood called Brickworks. If you are doing something green or improving the world, then these funds may help.
There are the less obvious angels all around your business right now. Look up and down your business chain and talk to suppliers and customers and see how you can optimize your cash flows. You can delay payments (with suppliers knowing or not) using them as your float.