When is a Startup Ready for a Business Angel?
This article is written by Jeremiah Uke, a Contributor Author at Etohum.
Brigitte Baumann is the Founder and ex-CEO of Go Beyond Early Stage Investing. In May 2015, the European trade association for Business Angels and Seed Fund (EBAN) named her European Investor of the Year. She is President of EBAN and Chairs the Young Presidents Organization’s global Angel Investing group. She is a seasoned venture capitalist and was present at Etohum Kafe Toplantısı, and shared her experiences and what she looks for in investing.
Brigitte is the Founder of Go Beyond Early Stage Investing, Go Beyond enables novice and experienced, small & large investors, to get access to angel investing as an asset class through its unique platform, tools, training and expert angels.
Go Beyond is at its best when a business has three things ready, one of them is when the entrepreneur has a good idea of what your business models will be, even though it might change, this may involve having a few prototype or pilot clients. The second thing is goodwill from people who have worked with your team, it is important because more than 50% of entrepreneurs decide to stop in the first year, or teams get separated, the risk of this occurrence goes down after a year. The last thing is market feedback, a startup has to be worth something before we invest 200-400 thousand to own less than 20-30% shares.
On crowdfunding, there are different kinds of crowdfunding, there’s the Kickstarter, which is when you are coming out with a product, a number of startups use this for marketing and visibility, it works as pre-order for a product and raises capital, Brigitte advises entrepreneurs who want to try Kickstarter crowdfunding to be ready to ship a lot of products if the demand is high. The second question to ask is “what are the fees you are really being charged?” and “how will the flow of money to logistics work?”.
The other kind of crowdfunding is more project management based, it focuses more on projects like new media, and movies. While other kinds of crowdfunding are springing up, the third kind that is practised by Go Beyond works as a mechanism where small investors are pulled together to raise an amount for an entrepreneur. It is important for entrepreneurs to know who the investors are especially when dealing with small investors, a lot of investors get trained on how to invest beyond just giving the money, down to technicalities where the investor or the entrepreneur can lose everything. It is important for entrepreneurs to be educated in the mechanics and not just on being great CEOs.
Go Beyond believes that new ways to attract funding will spring up, but hope that they will get incorporated in ways that can give entrepreneurs more visibility to angel investors.
Entrepreneurs also have to do due-diligence on investors, investors do the same for entrepreneurs, some of the questions investors ask themselves is:
1. Is this an industry and business model I know?
2. Are my skills and knowledge complimentary with the team?
3. Can my network or contacts be helpful?
4. Do we have similar values?
5. Do I know potential clients for the company’s products?