Angels Den Blog

Financial Angels, aka business Angels, provide much-needed funding to entrepreneurs and small business owners, assisting them in establishing or growing their business. While business Angel funding is not yet being used to its fullest potential, increasing numbers of entrepreneurs are turning to these financial Angels for funding, particularly in this time of low bank lending and economic recovery. If you have toyed with the idea of becoming a business Angel, there is truly no better time than the present to enter this potentially profitable realm. Due to the current economic climate, there are deals to be had, and these deals have the potential of turning into highly lucrative investments in the coming years.

There are many reasons why people choose to become financial Angels, not the least of which is – of course – the money. Investing in promising start-ups as an individual or as part of a syndicate can result in significant returns, particularly for those who develop a diverse portfolio. And, there is a distinct sense of well-earned pride when you become a financial Angel, as it is often considered a clear indication that you have arrived. When you have achieved a position that allows you to provide funding for businesses, you have likely met at least some of your professional and financial goals, and your hard work is now paying off.

Aside from the financial aspects of being a private equity investor, some become financial Angels out of a desire to help others achieve their goals, promote small business ownership or put something back in out of gratitude for their own success. It should be noted that business Angels often go beyond merely providing funding and also lend their skills and experience to help ensure the success of the company in which they have invested.

Because financial Angels are most often investors who have a high net worth, it is a common misconception that someone must be rather wealthy to become an Angel. While it is true that a good amount of expendable income is required, it is not uncommon for an Angel to begin by investing as little as £10,000. Starting out with a modest investment is a good way to get your feet wet and to help you determine if private equity investments are for you.

If you are seriously considering joining the ranks of the thousands of financial Angels in the UK, here are a few other tidbits for your consideration:

• It is a good idea to have a legal mind on board who can assist you in reviewing documents, completing agreements and determining the terms of any deal.
• It is also a good idea to enlist the services of a corporate financier or accountant with experience in advising on tax issues and assessing business plans.
• You may want to consider teaming up or investing in parallel with a seasoned Angel who won’t mind throwing a bit of advice your way when needed.
• Like any other business endeavour, you will need to develop a plan that includes how you intend to realize your investment goals, as well as an exit strategy.
• Do not rush in. Take your time to find the company – or companies – that feel like a good fit and show promise.
• Once you have narrowed down your list of potential companies, take the time to learn more about the entrepreneur, management team or directors for each business. Make sure that you will be in good company and are not falling in with a questionable crowd.

Financial Angels play an integral role in the success of many small businesses and in bringing brilliant ideas to fruition. If the excitement of investing in promising start-ups is appealing to you, and you get a certain thrill from the idea of lending your business acumen to help others achieve success, becoming a private equity investor may be the perfect fit for you.

Image © Richard Masoner

With their recent investments and profit reports, UK banks appear to be recovering quite well and once again beginning to live large. However, entrepreneurs in search of funding for starting a business should not expect to necessarily see a piece of that pie. Never mind that some of these institutions are now at least partially owned by the British public, after being bailed out with our hard-earned money; banks are still not holding up what many believe should be their end of the bargain. And, it is not just a few business owners who think the banking sector needs to step up and start lending more; Chancellor, George Osborne and Business Secretary, Vince Cable have both spoken out quite clearly on the need for banks to fulfil their obligation to increase lending, such as providing funding for starting a business.

At the same time, big banks are making their own statements, defending their current lending stance by professing their commitment to the continued support of established companies and the provision of funding for starting a business. Some, such as Eric Daniels of Lloyds Banking Group, have gone as far as to say that low bank lending rates are more about businesses not wanting to borrow and increase their debt, than about the banks telling them no.

Of course, if those looking for funding for starting a business were asked for their take on Mr Daniels’ claim, we would likely hear quite a different story. In fact, the Chancellor was not shy about pointing out that he had visited several SMEs over the past few weeks and that all had reported having some kind of difficulty with their banking institution. In particular, these businesses reported difficulties in attempting to renew overdrafts and banks demanding more collateral.

That hardly sounds like banks are trying to give away money, while established firms and those in search of funding for starting a business are turning up their noses. It seems much more likely that the banking sector is ignoring its obligation to assist in economic recovery and help to ensure that viable businesses and ambitious entrepreneurs seeking funding for starting a business have access to the money they need to establish or expand on their endeavours.

Now that major banks are once again showing profits, the bank bosses are the only people who seem to think their institutions are meeting their lending obligations. And, to see just how much some of these banks have turned around, here are some examples of the profits reported for the six months to June:

• Lloyds Banking Group reports a pre-tax profit of £1.6bn (Let’s not forget they are now 41% taxpayer owned.)
• HSBC reports a profit of £7bn
• Societe Generale reports a profit of £900m
• Northern Rock reports profits of £350m

Improvement in the economic status of banks is a necessity as the economy continues down the road to recovery. However, that improvement means less and makes less of a difference in the economic climate when banks are holding back funding from small businesses and are requiring ridiculous amounts of collateral when they actually do provide funding for starting a business.

Business Angels have become even more important to small businesses and entrepreneurs seeking funding for starting a business in the current lending climate. While the banking sector might be continuing its well-established trend of failing small business, the private equity finance sector is alive and well, and only getting stronger. As long as there are brilliant, ambitious entrepreneurs in search of funding for starting a business and generous, experienced business Angels to step up to the plate and provide that funding, SMEs will continue to thrive.

Image © Leo Blanchette

It can be seen that the bad Apple in Steve Job’s strategy has been the complete and utter lack of a social media strategy and now he hopes to solve it with the new 85.34mb iTunes 10 update that offers something that’s called Ping.

Ping’s Pong?

The interesting element of all this is that Apple have been known for being ruthless in business and exhibiting an uncanny knack of knowing exactly what people want, but they must of have had a glaring blind spot to the social aspect of music. Spotify first came onto the scene in November 2006 and not only offers consumers free access to millions of songs, but from an early date have managed to build in a very strong social aspect by offering the ability for users to create and share their own playlists. Not only that, but within the system you can tweet and Facebook individual songs and those playlists – they even encourage others to recommend music by fostering other music sharing networks based on their own infrastructure. But, how can it take a company as “on the pulse” as Apple so long to bring something that they can only hope dominates “their” market? Crikey even Myspace was offering sociality to music 6 years ago.

If Apple were so late off the starting block, how can they take the lead? With 160m users compared to 40m for last.fm and 7m for Spotify you would sure expect they could do so. Even with great marketing (in the past) you’re only good as the product you offer. Twitter is good now at encouraging you to connect with more people (they recently even stopped you bulk deleting your follows) and Facebook excels at helping you find friends to connect with when you give them temporary access to your email accounts. How does Ping do it? Well you’ve got to know your friend’s email addresses. With most of us having more than one email account, how are we supposed to know which account to use – especially as most of us connect within social networks that don’t even rely on email use?

Furthermore, people may become a bit wary of the commercial nature of iTunes and the possibility of the recommended music being influenced by the marketing dollars of the record labels rather than the grassroots recommendations of the masses.

So what can entrepreneurs learn from Apple?

• Just because you’ve been successful in the past, don’t assume that you will be in the future;
• If you spot a hole in your strategy, fix it quickly;
• Don’t lose sight of the strengths of those new competitors and make sure you replicate or improve upon them in your own offering;
• Make the damn thing work properly.

Business Plans Less Important?

Perhaps Apple needs to revisit their business plan? But if they’re like the UK internet community then they’re probably less interested in them than they used to be – well that’s according to Google data.

Are we right in asserting that as people have become less interested in business plans that they’ve turned their attention directly to getting a business loan instead? An alternative view would be that as people disregard the need for business plans, the end result is that in time they’ll forced into getting a business loan? The reallity of the situation is anybody’s guess.

Angels Den Comming To A Conference Hall Near You

What’s new us though? Well Co-Founder Bill, will be speaking at the Web 3.0 conference in Hong Kong in November. However, if you can’t wait that long and would like to see Bill in action closer to home, you can at the London Connections event in association with Business Scene, The University of East London and Knowledge Dock. The event will be held on 27th September at The Marriott Hotel, Marble Arch. Click here for more details.

Of course they’re not the only events to be of interest in the coming months. Don’t forget we’ve got a whole host of SpeedFunding and free Funding Clinic events up and down the country – all with the aim of helping you attract Angel Investment. Find out when and where they are here.

Do you want to meet an investor or two who can help you move your business to the next level? Then come along and pitch at our next London SpeedFunding event on Thursday 9th September. There you will get the unique opportunity to meet and talk to Angels on an individual basis, pitch your business and have an informal chat with them afterwards.

Recent success stories include Larosco, a business who recently pitched and secured funding. Click here to read their story.

With more and more investors signing up every month, we know there are more people out there looking for passionate entrepreneurs with great business ideas like yours. Want to find out what SpeedFundingTM is all about? Listen here to a recent broadcast on BBC Radio Scotland covering our last event.

Contact me on 07711 089 333, email ian@angelsden.co.uk or book your place here to get a step ahead today.

The event includes a two hour pitch training session at which we will give you a briefing on what Angels are looking for, how to best get across the key points in a concise way and let you refine your pitch to help you succeed.

Event Format
15.00 Pitching Training
17.00 Practice Pitching
17.30 Meet Angels as they arrive
18.30 Introduction from Angels Den
18.45 One to one pitching
20.00 Networking and follow up meetings
21.00 Close

Event Location
Edwards Angell Palmer & Dodge LLP, Dashwood, 69 Old Broad St, London, EC2M 1QS.

If you have any questions, please don’t hesitate to email me for more information.

I look forward to seeing you there!

And if you wanted to learn more about Angels Den then watch the BBC Working Lunch feature:

Best regards
Ian

Ian Shipman
London & South East Regional Manager
Angels Den

07711 089 333
ian@angelsden.co.uk
W:www.angelsden.co.uk

There really is no choosing to become an entrepreneur; there are some who are simply born to bring new ideas, products and solutions to the marketplace and others who do not have an entrepreneurial bone in their body. But even those who have the skills and ambition to become an entrepreneur must be prepared to face the harsh realities of the business world and to gain the knowledge required to bring their brilliant ideas to fruition.

Before you quit your day job to devote your time to becoming a successful small business owner, there are 10 important laws you need to become intimately familiar with as you begin your journey down the road to become an entrepreneur. Ignore them at your peril because each comes with a sting in its tail for those who, intentionally or due to ignorance, abuse them.

1. Copyright – Everything you write will affect your business, but if your words are plagiarised, it can also affect your credibility and your purse. Copyright infringement is serious business, and if you use words that belong to another, the original owner can come down on you with copyright laws soundly on their side.
2. Patent – Patent laws are in place to protect your brilliant ideas, as well as the brilliant ideas of others. Lack of attention to detail can leave your intellectual property unprotected, while lack of research can leave you open to lawsuits.
3. Employment – Part of the drive to become an entrepreneur usually comes from wanting to be the boss. Employment law can be a minefield that pushes some small business owners to opt for contractors and freelancers, as opposed to permanent staff. However, understanding employment law will help you to properly manage staff and ensure that you are protected as the employer.
4. Financial – Financial laws, such as the legislation regarding Capital Gains Tax, can seem daunting when you first become an entrepreneur. The sale of assets and other covered activities requires a special kind of attention, which is one reason to choose an excellent accountant who will provide the necessary advice.
5. Contract – Contract laws cover the agreements you have with suppliers and purchasers, as well as the contracts you have with those who work for you or with you. It is essential that anyone planning to become an entrepreneur has a good handle on this particular set of laws; otherwise, you could leave your organisation open to all manner of unnecessary risks.
6. Health and Safety – An intimate knowledge of these regulations will guide you through exactly what you should and should not do to cover yourself in the event of an accident in your workplace. We’ve all seen those adverts on the TV for law firms that will help you to bring down an employer who has allowed you to have a “slip or a trip that was not your fault”. Don’t let your company become a financial victim of such an incident.
7. Distance Selling – Selling online is a huge business and is the primary reason why many choose to become an entrepreneur. Before you make your first online sale, it is imperative that you know your customers’ rights in regards to online purchases. Without an understanding of return policies, cooling off periods, and privacy you could get in all kinds of trouble.
8. Advertising – Regardless of what you may believe about the honesty of advertising in this country, there are specific laws that govern what you can and cannot say when advertising your product or service, and there are bodies that police them.
9. Property – Many entrepreneurs overlook the need to be familiar with property laws. However, not knowing them could leave you looking for a new office space or finding yourself liable for massive, unexpected payments.
10. Murphy’s – Just when you thought you might know all you need to know about the laws that will affect your business after you become an entrepreneur, there is always this last one to consider. Murphy’s Law runs rampant throughout the business world and anything that could go wrong, most likely will. This means that above all, you need to be prepared for anything.

Fully understanding these must-know laws will assist you in ensuring a successful journey to become an entrepreneur. Even if you employ accountants and solicitors to keep you informed, it is essential that you understand the ins and outs of these legal areas. You can never be too prepared when it comes to taking on the big, bad world of commerce, so take the time to ensure you always have these laws on your side.

Image © Jasmine