Like a blessing from the heavens, angel investors bring what a small business needs in a time of growth. Angel investors don't just appear overnight out of the sky. You must juggle the time demands of running your business and conduct a time-consuming search for an angel.
On a wing and a prayer, an angel investor can help take your company to the next level in one swoop. At what time in your company's lifecycle are angel investors a best option?
Time for an Angel Investor?
When your business is simply an idea and in need of seed money, angel investors aren't yet your source of funding. It's advisable to wait until you have used your own and friend and family funds before searching out an angel. A powerhouse method of moving your business forward during start-up, often overlooked is bootstrapping. Run your business as tight as possible, cutting costs, and using creative means of marketing.
Once you've fine tuned your marketing and business plan along with a viable product, consider approaching angel investors or an angel group.
Barry Moltz has experience at both sides of the table as an entrepreneur and angel. He is the co-founder of Prairie Angels and advisory board member of the Angel Capital Association sponsored by the Kaufmann Foundation. According to Moltz, a mistake made by most entrepreneurs is searching for angel investors money at the wrong time. Funding a start-up for the majority of North American businesses comes from the founder's own pocket not from angel investors. Apply the four F's for money sources for your start-up: founder, family, friends, and fools.
Moltz says, "The worst time to look for money is when you are running out of money. The best time to look for money is when you already have some kind of business with revenues, are reaching the breaking even point, and you need additional capital to expand what you already started."
When you need from $25,000 to $500,000, angel investors can provide the money to make your small business successful. Angels help bridge the gap between seed money and venture capital.
The biggest challenge any entrepreneur will have in finding angel money is time to run your business and search for an angel. You can expect to spend considerable effort in networking and meeting key people along with developing a business plan to attract an angel. All this happens while you have to continue to focus on your business. Consider the 5 following tips to keep your sanity and business together: