If you’re looking to get your start-up out of the blocks and running or moving to the next stage of your business’s development, you may be seeking additional and external funding to drive that growth. Securing angel investment could be a good option.
An angel investor is someone who invests their own money in a small business they have identified as having the potential to grow, scale and exit in exchange for an equity stake.
Angels usually originate from a strong business background. Often entrepreneurs themselves or having held senior positions in large companies. Their aim to get a return on their investment is clear, but not always the only factor. Often, in addition to providing finance, angels are keen to use their knowledge and experience to help others on their way through mentoring and other support.
How do angels operate?
Angels can operate alone, though more often they can be part of a group or a syndicate. A key benefit of operating in a syndicate can be the sharing of due diligence and experience. The sector specific knowledge of other investors can also reduce investment risk. A lead angel will act as a coordinator for the investment deal and will likely have most contact with the business once the deal is done. They can continue to provide mentoring and support, liaison with investors and sometimes they may be appointed Chairman or as a non-executive director.
Your local business angel group
Dorset Business Angels is an organisation that helps early-stage businesses find equity capital. We bring our investor members and entrepreneurs together to accelerate the growth of early-stage companies.
We do this through our ‘Dragons Den’ style pitch events which we hold four times a year. From time to time, we also share plans and pitches with our members outside of the events, when appropriate to do so.
Our in-person pitch events are usually held in Bournemouth. Though we feature companies from across the UK, we have a strong focus for those based in the South, this being our regional area and where most of our investor members are based. In person mentoring and support for entrepreneurs is therefore much easier to access, though of course digital meeting methods remain an important tool and allow investors and entrepreneurs from wider afield to connect easily.
Entrepreneur pitches to investors are usually 10 minutes long, a question-and-answer session follows; after that initial expressions of interest from investors are noted. Often more detailed questions are asked post event and then assuming everyone is onboard, investors move to the due diligence phase. The is the time when the business’s finances and operations are scrutinised in detail and is an opportunity for entrepreneur and investors to get to know each other.
Is angel investment the right route for you?
Generally, your business can be early stage, pre-revenue, or pre-profit with a turnover of less than £5M. All sectors are welcome, DBA is not sector specific, and angel investing is most suitable for companies with a scalable business proposition.
The investment should be for growth capital, including product development, building teams, increasing sales, or entering new markets. The amount of investment usually ranges from a few thousand pounds through to £500K, although larger syndicates can offer up to £2M. It can take between 2-6 months to get through the due diligence process and for all parties to work out the deal, then typically the duration of the relationship will be 3-8 years. You can read a couple of DBA case studies here.
What you’ll need before approaching an angel group
- A business plan which allows potential investors to understand your business model and the strategy you propose to adopt to grow the business to the next level.
- Detailed financials behind your headline forecasts. A P&L and cashflow forecasts for a minimum of 3 years.
- A clear and concise pitch deck explaining the opportunity, including your financial headlines.
- At DBA, we also ask you to fill out a summary sheet which gives our screening committee an overview of your offer to members.
You’ll need to have realistic expectations about the growth of your business, you’ll need to be transparent about it and you must have a clear exit strategy for angels to realise their investment.
If you are a local start-up business (or based elsewhere in the UK) and ready to approach business angels for the first time, or are in a new round of funding, then please do get in touch to explore the opportunity to pitch at one of our popular events. Check out the Entrepreneur Resources page on our website for all the details.
Roderick Beer, MD of UKBAA delivered a webinar in November 2022 ‘Scaling Your Business Through Angel Capital’, you can view the hour-long session here. It’s a really useful watch for founders as Rod is not only the MD of UKBAA, but he’s also an Angel Investor. The webinar contains observations and advice from Rod which are invaluable.