Guest Lecture: Business Angels

The lecturer began by giving a brief overview of what one must consider when starting a business, including sources of finance such as bank loans, gifts of money from relatives, governmental grants, stock sales, and support from so-called ‘business angels’. He warned us that there are several questions investors will always ask. Firstly, how much money you have invested in your own business, and whether or not you have any preexisting debts. Once they’ve established the sincerity of your efforts, they’ll ask about how safe it is for them – what the risks are, and how they can get out if things go pear-shaped and you fail to return a profit.

There’s an important distinction between banks and other investors when it comes to getting money out of them: banks base their decision to give you a loan or not based on what has already happened – how well your start-up has gone, what your existing credit rating is, things like that. Investors, on the other hand, base their decision on what they believe is going to happen in the future.

The final thing he cautioned us about with regards to investors was this: they’ll often ask for evidence or assertions that your business idea is viable. When they do, ask them what exactly they mean. The definition of a viable business varies widely, and you should ensure that your idea matches that of the investor.

He concluded the lecture with a section more specifically to deal with business angels, and details of their role. Firstly, they can bring many things to a business: money, contacts, expertise, skills, credibility, bran muffins. What they are looking for before they’ll invest is quite simple: firstly, a business plan – evidence that you have a clear goal in sight and a definite course planned. Secondly, investments – they won’t back a business that you won’t put your own money behind. Finally, passion – just as with getting a job in the games industry, the ability to appear deeply passionate about and committed to your ideas will get you ahead.

Business angels, like other investors will want to see a demonstration of how much you believe you’ll be able to sell, as well as a plan to get out of the business if it should go sour. There are four principal ways a business can end: success, bankruptcy, being sold off to someone else, and if all the shares are bought back by the owner.

Essentially, to get the investment of a business angel, tell them why they should invest, then ask for the money. It’s especially important to do that last one.

Published on January 9, 2010 at 12:21 pm  Comments (1)  

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