How to find an Angel Investor
Approaching affiliated angels (contacts you know) is simply a matter of phoning to make an appointment. To look for non-affiliated angels (individuals not already known to you), try these proven methods:
The business opportunity section of your local newspaper or financial magazine is an excellent place to advertise for investors. Classified advertising is inexpensive, simple, quick and effective.
2. Business brokers.
Business brokers know hundreds of people with money who are interested in buying businesses. Even though you don’t want to sell your business, you may be willing to sell part of it. Since many brokers aren’t open to the idea of their clients buying just part of a business, you may have to use some persuasion to get the broker to give you contact names. You’ll find a list of local business brokers in the Yellow Pages under “Business Brokers.”
This approach has been called “dialling for dollars”. Firstly, you get a list of wealthy individuals in your area. Then you begin calling them. Obviously, you have to be highly motivated to try this approach, and a good list is your most important tool. Look up mailing-list brokers in the Yellow Pages. If you don’t feel comfortable making cold calls yourself, you can always hire someone to do it for you.
Attending local venture capital group meetings and other business associations to make contacts is a time-consuming approach but can be effective. Most business newspapers contain an events calendar that lists when and where these types of meetings take place.
These are firms that find angels for entrepreneurial companies. They are usually called “boutique investment bankers”. This means they are small firms that focus primarily on small financing deals. These firms typically charge a percentage of the amount of money they raise for you. Ask your lawyer or accountant for the name of a reputable firm in your area.
Angels tend to find most of their investment opportunities through friends and business associates, so whatever method you use to search for angels, it’s also important to spread the word. Tell your professional advisors and people you meet at networking events, or anyone who could be a good source of referrals, that you’re looking for investment capital. You never know the types of people they know.
Joining an angel investment matchmaking online network
It is probably better to register with a local network, as it is easier to do a background check on the site and obtain references regarding possible investors.
Local vs. International Network
Using a local network makes dealing with possible investors so much easier. It is important to be able to meet them face-to-face and they too will appreciate meeting the person to whom they are lending their hard-earned money.
Why is a registration fee necessary?
Charging a registration fee works as a quality filter. This means that the network will only attract those that are serious about finding investors and hopefully filter out those who are not serious. However, there are people out there who will claim to have good contacts in the angel community and charge hefty fees up-front and then don’t deliver; this is why it is important to register with a network that has a code of ethics. If they offer a refund or guarantee of some kind, even better. Most, however, have terms and conditions that you must read carefully and understand before registering.
Do your own investigation before paying a registration fee
You can visit http://www.whois.co.za for background check to find contact details for the owner of the website.
- Contact the network and request references from other users.
- Do an Internet search and see if there have been any complaints.
DIY angel networking
You do not have to sign up with a network. Angel investors can be people you know, or do not know. Those you know might form part of your business network e.g. suppliers, employees, customers. Those you don’t know can be made up of professionals, managers in the corporate world, bored with their jobs who want to invest in something new.
How to protect a business idea before pitching it to an “angel investor”
Entrepreneurs are often in a tricky situation when presenting their business plans and intellectual property (IP) to potential investors. On one hand you need to play open cards in presenting your idea and business plan, on the other hand you are nervous about giving too much of the game away for fear that an unethical investor may steal your idea. The best way to protect your intellectual property is to ask the investor to sign a Non-disclosure Document.
How Spartan Has Geared Their Business To Help Fund Yours
Spartan doesn’t just fund entrepreneurial businesses, it is an entrepreneurial business. Kumaran Padayachee, CEO, Spartan reveals this is why his team understands SME financing needs and the unique challenges founder-led businesses face.
Historically speaking, entrepreneurs don’t typically have the quantity and quality of collateral needed to secure debt finance. It was this realisation that led Spartan to develop and deliver a solution that would help SMEs to grow their businesses, even though they didn’t always meet the criteria of more traditional lending institutions.
“We understand that many business owners don’t want to go the equity funding route, selling shares in their businesses in exchange for funding. Without the collateral needed to secure debt funding however, this is often the only route available to them,” says Spartan CEO, Kumaran Padayachee.
“We decided to approach things from a different angle. To service this sector, you need to be flexible. The same rules don’t apply as they do for corporates. To achieve this, we’ve assembled a team that really understands SMEs, their inner workings, the finance they need and the terms that will give them the best ROI for the funding they receive — after all, the point of funding is to help your business grow, so ultimately that’s what it needs to achieve.”
Spartan’s offers financing
At its core, Spartan finances small businesses (fast-growing companies with R5 million to R10 million annual turnovers) and medium businesses (R10 million to hundreds of million in annual turnover).
Related: Financing That Backs Entrepreneurs
Spartan finances specialised asset finance (tech, software, plant and machinery, office fit out and furniture); working capital finance (bridging finance, medium term loans); and growth finance (expansion, BEE deals, acquisitions).
Working capital in particular is a big portion of what Spartan assists its clients in. “This is project and growth-related finance, and many of the enquiries are for working capital, for which there is a huge need in the SME landscape.”
What finance suits your business?
As a debt funder, Spartan’s team carefully evaluates what the finance will be used for, and if the return is greater than the repayments — in other words, does finance make financial sense for the business?
“There are numerous ways that finance can be applied incorrectly by SMEs,” says Kumaran. “One of the first flags we look for is debtors age. If the industry norm is payment in 30 days, but a business is typically paid by its clients in 60 or 120 days, then we know there is something wrong with their internal processes.
Either the company is too shy to be assertive with clients, or it lacks the capacity or capability to invoice clients and collect cash. Either way, the result is a shortage of cash. Business owners in this situation apply for cash in order to be able to pay the bills, when they should be reviewing their business, pulling one or two levers, and improving their cash flows.”
Growing your business with alternative funding methods
On the other hand, there are many situations where working capital and bridging finance can help a business to grow beyond its own, organic abilities.
“A customer project or contract that requires a new product line or opening a new branch are both positive, expansionary situations. The problem is that there’s a lead time gap. You need to start the project, spend cash to hire people or purchase equipment, build internal capacity, deliver on the project and then the customer only pays you. Working capital and bridging finance allow the entrepreneur to do just that, and the company grows as a result.”
Bridging finance in particular is high risk and requires a large amount of flexibility, which is why more traditional funding institutions shy away from it. Spartan on the other hand offers revolving bridging loans to customers the team has worked with. “We understand this space, and our aim is to support the entrepreneurs within it,” Kumaran concludes.
Alternative finance solutions
Spartan is an Alternative Finance company that specialises in financing Small and Mid-sized businesses by providing: Growth Finance (structured finance for expansion); Specialised Asset Finance (equipment/machinery/technology/software/office fit-outs/energy/etc.) and Working Capital Finance (bridging finance & medium term loans).
Bridging Finance is available for one to three month terms and is ideal for contract or project-based businesses. It is a solution that assists businesses with solving cash flow issues due to growth-related challenges in their business and is either for a once-off need or for revolving business use.
Spartan is an Authorised Financial Services Provider 47631 and Registered Credit Provider NCRCP8669. e finance solutions.
What do I need to do in order to get a successful crowd funding campaign?
Advice on getting the gold you need for your crowd funding campaign.
I recently read through crowd funding and though this might be of benefit to me. What do I need to do in order to get a successful crowd funding campaign?
70 percent of most crowd funding campaigns never reach their funding laid out plan. If you only reach a portion of your desired pledge amount all donated funds are then returned to investors once your campaign date is up. Do your homework and make your campaign count.
To get the best out of your campaign, I would strongly advise you do the following:
- Lay out your plan way in advance
- Keep a proper and well-articulated business plan
- Create a compelling story.
- Use the social media and start a social media campaign
- Frequently promote your fundraiser, connect and interact
- Dish out rewards and incentives
- To go viral, go for educative, informative and entertaining videos
- Be more than unique and creative as more exposure will translate to more potential pledges
- Choose the right crowd funding site for you.
- Know and understand your end target audience
Where can I turn when banks are not helping?
Getting bank finance for my restaurant is almost impossible.
Getting bank finance for my restaurant is almost impossible. How else can I access the funding that I need?
Most small businesses will experience a cash flow challenge at some point during the next 12 months and raising capital from traditional banks is becoming a real challenge. Conservative lending policies and onerous application processes mean that finance applications can take up to twelve weeks or longer.
Banks require significant securities, which many business owners are unable to meet. In short, banks are making it very tough for small businesses.
The business cash advance
For businesses that accept credit or debit cards as a form of payment for their goods and services (termed merchants), the business cash advance is now available as alternative source of funding.
In simple terms, a business cash advance offers the merchant an upfront advance to buy a discounted amount of future business turnover. For example, you may be advanced R80,000 for R100,000 of future turnover, so the fees can be easily calculated as R20,000.
The payback is an agreed percentage of your turnover, paid daily until the full amount is paid across. Payback increases and drops with your business turnover and the smaller daily payments are often easier than monthly fixed instalments.
Quicker turn-around and more accessible
Comparing it to a bank loan, the business cash advance is more accessible, operates over a shorter term and requires no personal security. It is also much faster, typically available within two weeks.
The advance amount is based on historical credit and debit card sales and pay overs are daily. The costs are fully transparent and there are no penalties for late payments or extended payback. However, accessibility, flexibility and convenience come at higher cost than traditional bank lending products.
As with any financial product, it is important that the benefits gained from using the money are more than the costs, so it is important to have a good purpose for the funding and carefully consider the available options.
Over the last three years, the business cash advance has becoming more main-stream and this funding is used by business with a relatively high card turnover, such as restaurants, retailers, beauty salons, supermarkets, convenience stores etc.
What to use the advance for
The advance is typically used for a business opportunity, such as expansion, new stock, new equipment, marketing etc. Alternatively, it also offers through a difficult trading period or to cover an unexpected expense such as equipment failure when the money is needed quickly.
Small businesses are a vital part of the South African economy, contributing over 65% of South Africa’s employment and over 50% of GDP – accessing funding is imperative for these businesses to survive and grow.
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