The Australian Association of Angel Investors (AAAI) held their annual conference in Melbourne last week. The AAAI represents approximately 5,000 angel investors who actively invest and pursue investment opportunities, primarily for new technology companies within Australia. The business angel represents about the only funding source available to businesses trying to raise capital to finance the development of products for market, other than funds raised from “friends, family and fools”. It should not be assumed that it is easy to raise money from an angel investor.
By their nature most angel investors have already been in business and can normally introduce more than just cash to the financial equation. Some successful business people claim that the ability of an angel investor to introduce “brains and contacts”, as well as cash, makes an angel investor an outstanding friend to an emerging company. Whilst there are no strict rules on the requirements from angel investors, many of them do work in syndicates and have generally established procedures for the information they require.
These can include:-
- a product or service,
- something that is unique,
- a product/service that is able to be protected(patents, copyright etc);
- is there a market for the product at the price for which the business would need to sell the product?
- if the protect/service is able to be protected, has a patent application been made?
- does the management team have the necessary skills and experience to be able to take the product/service to market or does the business need to employ an experienced Chief Executive Officer who is able to guide the business in its formative period?
- trust – angel investors want to know that they can “trust” the entrepreneur.
Has the business documented its position with the preparation of:-
- Market Research Document?
- Marketing Plan?
- Business Plan?
- Budgets?
- Cashflow Forecast?
- Information Memorandum?
Has a valuation been performed on the company so as to determine the percentage of capital that could be offered to investors?
There are a number of questions to be answered to successfully raise capital.
This is a basic introduction to prepare for investment readiness. If you would like further details on investment readiness or the Australian Association of Angel Investors, please contact us.
