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Business Angels. Are They For Your Business? 7 Tips To Avoid The Traps

Venture capital is ‘the mouth-watering lingo’ these days in the finance world. It is clearly that ‘in’ thing. If you have a great idea that can generate a killer business, a great concept that is just waiting to reach the masses, you may immediately be advised to approach a business angel, professionally called as the ‘venture capitalist’. But hang on. Many new businesses and entrepreneurs commit grave errors in this arena. Check the following ground realities before approaching taking any committed steps :-

1. The world co-operates only if you are clear.

Make sure your idea is not that another ‘fancy’ born out of the weekend meeting of buddies. Be serious about it. Be sure about your product and not just about its idea. Ideas, are more often than not, very scintillating. Know that venture capital or angel financing is for those who need a major chunk of funds, probably not less than a few million dollars. It is for those who have a past successful track record in implementing a business idea. So be absolutely clear about your product and the business model

2. Don’t dig a well after you feel thirsty

If you are already aware of the world of banking and finance, then you must know that the process of raising funds may takes months together. So make no mistake of approaching a business angel if you need money the next day. Plan well in advance your needs and streamline your requirement well in advance. All this will require a sharp business acumen from your side.

3. Business angels have huge stomachs

Venture capitalists and business angels are looking out for business that would yield them huge returns, say 60%, in the next few weeks. Approach them only if you are close to their expectations.

4. Know who will be the boss and plan accordingly

Since the angel would be investing a huge chunk of cash in your business, in many ways he will be your ‘boss’. He may ask you to alter your location plans or some other substantial plan affecting the business. Also know that the angel will expect you to keep all other things aside and focus only on the business. So you may have to sacrifice your idea of a ‘peaceful’ and ‘serene’ life at least in the initial phases. 

5. Be precise with your business plan, initially.

Highlight the main ideas of your business plan and wait for it to be shortlisted. A detailed project report (DPR) can be submitted after the angel shows interest in your proposal. Don’t presume that the VC has all day to entertain your beautifully scripted plan.

6. Follow prudence and ‘substance over form’.

If you feel that your business will yield you a growth rate in sales revenue of, say, 15% per annum, play safe and quote a growth rate of 10%. This is being prudent. Don’t overestimate as well as underestimate the business potential of your product.

7. Focus on the business networks

Be sure your business angel has a great networking and guiding faculty. You need to be keen how to explore his networks for the mutual benefits. 

Venture capital is like a double-edged sword. It can prove a great boon if you take care of the few basic things, the most important being to be sure of one’s own product and business/revenue model. The the C’s –  Being CLEAR, Being CONSERVATIVE and Being COMMITTED are the keys to a successful VC application.

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Posts by SpeakBindas Editorial Team.

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