What is Angel Investment and Do I Want It?

We have covered the topic of raising money for business in our eBook, Cash Light in a Rich World, in some detail.  However, as Beany has just completed a capital raising round, we felt there may be other clients who are interested in knowing more about angel investment.

What are your Angel Investment Options?

We have raised capital through Enterprise Angels, based in Tauranga and Ice Angels, Arc Angels and K1W1, all based in Auckland.  But there are a number of NZ groups listed on the Angel Association website.  Angel investors are looking for companies with turnover between nil and $2 million.

Angel investors typically invest quite small amounts individually, but it can mount up in the larger groups.  A typical fund raising round for a young company, including *pre revenue companies, will raise $200,000 to $500,000, & up to $1 million.

*Pre revenue means companies that have an idea, probably a prototype which has been tested, works and has an identifiable market, but no sales have been made yet.

How do you Decide Which Angel Group to use?

Each angel group has subtly different investment criteria so it pays to do your homework on each group.  Talk to the CEO or the team at each investment group:

  • Ask about their investment strategy – some prefer early stage, some prefer more mature companies
  • Ask about the fees they charge for raising money (usually about 6%)
  • Ask about companies they have already invested in & which sectors do they prefer
  • Ask about the valuations of those companies and the amount they raised
  • Ask about their role as lead investor

There is a lot of jargon in this arena so if you hear something you don’t understand, ask for clarity.  You’re allowed to ask as many questions as you like!

Some Other Factors to Consider

How much are you prepared to dilute your shareholding? It is important to maintain control of your company and if you dilute too much too soon, you can lose control.

How much money do you really need to achieve your goals? It is tempting to under-cook this so you don’t have to dilute too much.  Be brave on your aspirations and your valuations.

What conditions come with the money? Most angel groups will want a seat at your board table – make sure you get a good person there and know how to get rid of them, if necessary.

What benefits might come with the money? Perhaps some of the individual angel investors have skills or contacts that you want – this can prove more valuable than the actual money.

How will you calculate the current value of your company?  This is of critical importance.

Please feel free to contact sue@beany.com for more information on capital raising from the Angel community.”