Playing an Angel
Even when the financial arena is dealing nothing but bum hands, angel investors can be the wild card that puts you on top.
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Raising money ranks right up there with root canals and tax
audits as one of those not-so-fun, yet necessary, activities in
life. And the dotcom bust, tumultuous money markets and slowing
economy certainly haven't made the money hunt any easier. But that's the bad news. The good news? "There's
definitely money out there, and companies that have good business
models and combine that with great management teams can certainly
get capital today, from both angels and VCs," says Brian Hill,
co-author of Attracting Capital From Angels. The tough part, of course, is getting the money. But experts
offer a few tips to help ensure success. First, you have to network
with everyone you know, such as family, friends, your lawyer, the
neighborhood grocer--anybody who will listen to you talk about your
idea. You'll also need to perfect your elevator pitch; two
minutes is probably the most time you'll initially get with an
angel. Content Continues Below
And the companies with the best chance of obtaining angel
funding in 2002 are those that already have a product or service on
the market or are very near marketability. Those whose companies
have made it to the break-even point have an even better shot at
growth capital, say experts. So if you're in the early stages
of a start-up, you're probably not going to get angel financing
just yet--you need to be a bit further along. Why? Investors are looking for entrepreneurs who have gone back
to the bootstrapping way of starting a business--entrepreneurs who
have used their own seed money, created a business plan, acquired
customers and set up distribution channels. "[Many
entrepreneurs] are thinking about doing those things, but they want
to get someone else's money to go try it and see if it
works," says Cal Simmons, co-author of Every Business Needs an Angel. "I
would much rather talk to an entrepreneur who has already put his
money and his effort into proving the concept. And I think most
angels I know feel the same way right now."
Originally published in the May 2002 issue of Entrepreneur Magazine
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