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    9 Replies Latest reply on Sep 3, 2008 4:52 PM by Adducent

    Investors - "The Angels Out There" funding for your business


      I see a lot of people online asking questions about investors for their business and get a lot of questions asked of me about Angel Investors.


      Basically they fall into four categories:


      1) Financial - investors who are the true "money" people. There interest is strictly financial, and they have little if any interest in providing any "hands-on" help with the business.


      2) Operations - investors who are often retired executives from large corporation that bring money and management experience to early-stage companies.


      3) Industry - value-added investors who put their capital to work in companies that are in industries where they have specific experience. Often they are executives with long-careers in a single and they may be retired executives.


      4) Entrepreneur - investors who started their own companies, made good money and use some of it to invest in early-stage companies. Often they learned the "ropes" from an angel investor that put money into their start-up(s).


      Where do you find them?

      Unless you have a very strong background and/or a high-growth significant business opportunity that you've got past the "idea" stage ... your best bet will be to look for an angel type investor that is close to you geographically and more of an "Operations/Industry/Entrepreneur type like I outlined above that has interest in your area and the industry you chose. The reason being is, let's say for example you are in Alabama and you contact an angel investor in California. They probably are not going to give you much of a chance to pitch them on your idea unless you can give them something compelling and of size and scope to catch their interest. "Financial Angels" may feel the same way.


      Small deals just don't travel well.


      If your venture is smaller scale or more narrow in scope; your best bet will be to locate and contact angel investors in your area or work the sources and prospects in your area that may 'become" an angel type investor for your company. One way to approach this type of an effort for smaller ventures or businesses is to do the following:


      Make a list of every one you know that is an either a retired business owner, or retired executive or manager. If you don't personally know anyone, then begin to work the people that you do know and see if they know anyone retired with that type of background.


      You can also use an industrial database or directory to search for companies in specific industries and specific geographic areas outside your own immediate area or area you plan to service (I use several but like Thomas Register, the best). Look at the profiles you find on the companies and find the executives/owners or management team.


      By doing the above, build up and develop a list of names and contact information of retired managers, executives and business owner's in your area or industry executives/business owners outside your planned area of service.


      Your plan will be to call or email them and briefly introduce yourself. But NOT to solicit them to see if they are interested in investing money in your business! There is a "right" and "wrong" way to do this. By doing it the "right" way you may be able to line up interest in your venture at a couple of different levels that will be of benefit to you!


      If any of you are interested to learn about the "right" way and how to use this approach successfully ... feel free to contact me and I will reply to you with some further guidance on this and an example of my own "contact" email/phone script that I use. I can also help you with determining if your venture is one that would have broader appeal to a wider range of investors and sources of funding. If you have a larger deal or venture with significant growth opportunities I can give you some direction on how to conduct a successful investor search for that as well.


      My profile on this site has my website address and contact info. Since this is the business classified section I'll also put my website and email address below as well so that you can reach me if you have interest in the above.


      Dennis Lowery
      Adducent, Inc.


        • Re: Investors - "The Angels Out There" funding for your business
          golfheaven Adventurer
          Nice article right on point. I do have question for you. How do you vet a prospective investor from another country??
            • Re: Investors - "The Angels Out There" funding for your business
              Thanks. As part of vetting a prospective investor (especially important for investors from another country) I would verify who they are (their credentials/references etc.), if there is serious interest from both parties but before you get too deeply into negotiations etc., have them show "proof-of-funds" by having the investor prospect's attorney or CPA attest to that in a letter to you on their firms letterhead (have your attorney or professional adviser confirm the letter's origination with the investor prospects firm)... the investor prospects personal financial and bank statement also is good to have as well, you would also want to use the proper legal documents prepared by your attorney for your protection, whose use and enforcement is in the US courts (not a non-US jurisdiction).

              Another important aspect of "vetting" an investor prospect is to gage how well you interact with them to see if you think you will, long-term, have a solid business relationship with them. If they are difficult to work with now or just don't "strike" you right ... then chances are should they put money into your company they will be even more difficult after they invest since you "owe" them. Just something to consider when you are talking/dealing with investor prospects.

              There may be more things that your attorney/advisors would suggest but the above is a good start.

              Dennis Lowery
              Adducent, Inc.
            • Re: Investors - "The Angels Out There" funding for your business
              Lighthouse24 Ranger

              Good points. What has been your experience with the "degrees of separation" between the person seeking funding and the person providing it? In mine, it is rare for an angel have an "Erdos-Bacon number" of more than 3 or 4 from the business owner. That is, someone the business owner knows, and someone the angel knows, also happen to know each other.

              I saw this play out over the weekend. A custom cabinet maker and a retired executive who certainly don't travel in the same social or professional circles happened to meet at a birthday party, got to talking, and will likely do a deal. How did they both end up there? The cabinet maker's wife and the executive (who didn't know each other) knew the "birthday girl" and had become friends with her because they take their dogs to the same groomer.

              In other words, my thought is that a business owner should start by thoroughly work through the network of contacts that he or she already has (no matter how fruitless that may appear from where the owner is standing) -- because it's more likely to pay off than approaching total strangers -- and even if it doesn't pay off, it will help the owner refine and improve the investment "pitch."

              Your thoughts on that?
                • Re: Investors - "The Angels Out There" funding for your business
                  golfheaven Adventurer
                  Doug: My experience thru this process has had many twist and turns. I have posted my plan on several free sites over a 18 month period. I received a email thru my website last week from a overseas investor that said that a VC friend of his saw it and that it would be a oppurtunity he was looking for. After a few e mails back and forth he said he will forward plan and projections for start up to his people. I received a letter of intent the other day which I just reply to to accept offered terms.So you never know where or when or even if will come. Never give up your dream. I am reminded of what T.S. elliot once said
                  "Only those who risk going to far, can find out how far one can go"
                  • Re: Investors -

                    Thanks. You gave a good example of how sometimes, contacts, whether planned or inadvertent ones, can have good results.

                    It reminds me of a story I read/heard once about how Benjamin Franklin lined up funding for the Continental Congress to continue the Revolution War:

                    As the story goes, he managed to wangle several million dollars from France though not exactly in a position of power to bargain from. Instead of fighting what would probably have been a losing battle dealing and discussing directly with the French decision makers (all men) ... at parties he spent time with the women (the men's wives) and became quite a favorite with them. His belief in his mission and purposeful need for the money resonated with them and circled back via the women to the men ... who agreed to loan the money needed. An oblique approach that worked.

                    I have sometimes seen that same oblique approach work when finding seed money or a key angel investor for businesses. So it does pay to "sow as many seeds" as you can and talk about your belief in the opportunities your venture holds. And practice does make you better at pitching your ideas.