To paraphrase wiki, an angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
This generally translates to someone with a lot of cash looking to invest in interesting new ideas. Some angel investors are philanthropists looking for great ideas to bring to life, others are scoundrels, and the majority lie somewhere in between.
Before the dot com bubble burst, boardrooms would talk about investors with a million dollars who wanted to invest equally in 10 startup companies. They’d know that 8 would bust, but if just one or two made it then they’d make back their money tenfold. It was a risky game, and a bust was inevitable as the investors learned new terms like vapourware, and that having a good idea was often not enough for a company to succeed.
In some ways Perth feels a little now like it did before the bubble burst. Smart money is moving away from mining and back again, but constantly drifting to technology excited by the prospect of new avenues of wealth creation. We have mature service industries and a well educated population riding the tide of technological advancement, and our clever people are full of clever ideas to build tomorrow. Money sees opportunity, but tempered by experience is more cautious to act.
You can expect angel investors to be savvy on the pitfalls and perils of startups, they’ve done it before, and can smell a con a mile away. They’re waiting for the right opportunity. For the right idea from the right person in the right room – one angel who believes is all you need.
Angel investors will expect compensation equal to the risk inherent in startup enterprise. The TV Shows Dragons’ Den and Shark Tank show a produced version of the type of deals you might expect. You don’t have to watch too many episodes to see one where deals of dubious value are struck, where companies unsure of their own worth take offers that aren’t commensurate to their apparent value.
Sometimes even startup companies seeking investment should visit a bank instead, multiple banks, and learn if someone there might provide the funds they seek. This is always a viable option especially if your startup is at a point where it can show a profit. It can’t hurt to ask.
For anyone seeking funds and having an idea that is too early or too risky for financial institutions, it is to Angel Investors they turn.
There are many regular events and forums you may attend to meet Angel Investors. If you have your elevator pitch ready, then it may be time to dryclean a good suit and stand up to be recognized. There are many wealthy investors in our community and we are able to make introductions.
If you’d like to speak about investment please call our Perth office on 1300 DAPPER from within Australia, or submit an online request for a meeting or consultation via our Contact page.
The next topic is a different form of investment, sweat equity.