Getting Investment Into Your Business – Equity
Tuesday, November 15th, 2011This is the next instalment of a series of blog posts I’m writing about how and why you need to get some extra cash into your business, so that it can grow and flourish as a grown up business.
Today, I’m going to look at how to bring angel investment into the business. This is an equity investment, where you give shares to someone else in return for a wedge of cash which you then to use to grow the business. The central idea is the same – although you own a smaller share of the business, that share of the grown up business is worth much more than if you still owned 100% of a little business.
Often you’ll find that someone you know already is happy to put in 10-50k, maybe more, in return for a share of your business. This might be someone in your family, a friend, a customer, or another business person you know through networking. It’s worth asking around, even putting it on your website so that people know that you’re interested. 40% of angel investments come from people who already know the business owner.
If you don’t have any luck that way, you might try one of the organisations which broker angel investment. I’ve worked with clients who have had success through Angel’s Den and Finance South East, both of whom have courted groups of angels, and will sell the idea of investing in your business for you. Be aware though, that this is only really worth doing if you need more than 50k, as by the time that you’ve paid the broker fee, and the lawyers, you’ll have probably spent about 10k.
These are some of the areas I look at when I’m working with clients on bringing in angel investment:
- A clear business plan which shows how the investor will get back at least 3 times their initial investment.
- The recent growth of the business – don’t allow the process of seeking investment to slow down your organic expansion, as you can make a much stronger case to an investor if your business is already growing.
- Suggesting a mix of angel investment and bank finance – an investor will be much happier to invest if a bank has said they’ll lend half the money. Everyone likes to share the risk and back a horse which other people are betting on
- I’ve also been able to introduce clients directly to investors, because I’m constantly networking to find opportunities for my clients, so I have my nose to the ground with right people.
I’ve also looked at how you can persuade the banks to lend you money next time, so make sure you don’t miss out by subscribing. If your business wants to grow and you know that you need some money to develop, do feel free to get in touch for a chat about how I might be able to help.
Other articles of interest about shares and equity in your business are:
How Can I Make My Company Eligible For EIS?
How to give away shares in your business











