If your business is looking for an investment then you are likely to come across angel investors. An angel investor is someone who invests in businesses with their personal finances. Many people will probably be familiar with the concept because of the popular BBC TV series “Dragons’ Den”, where budding entrepreneurs pitch their idea to multi-millionaires with the aim of getting “the Dragons” to invest their own money in the entrepreneurs fledgling business.
Angel investors usually take equity shares in a business in return for providing capital and their own experience. The main goal of an angel investor is to see a return on their investment. In order to do so they should be focused on helping your business to grow into a profitable enterprise and will usually look to get a return on their investment within a 3-8 year period. However, the amount of advice and business support contributed can be different for each angel so it’s important that you find the right investor for you and your business.
When deciding whether to invest in a business or not, an angel investor will evaluate the people at the business as well as the business itself. The experience of the business owner will often be the most influential aspect of their decision. When an angel analyses a business they will look at:
- whether the business fills a gap in the market
- what pain points the business addresses
- can any aspects of the business be protected through a patent or copyright
- how the business makes money and what the revenue streams are
- how profitable the business is likely to be
- has the product or service been sold already and tested with potential customers
- how big the market is
- is the business willing to give up equity shares in return for an investment
If your goal is to secure investment from an angel investor your business you will need to form a legal agreement between both parties. Rollingsons investment team specialises in drafting the terms of investment agreements and can offer impartial advice on the legal implications of the investment.
We do not give generic investment advice, but instead give legal advice on the rights and responsibilities or investors and investees. For more information or to arrange an initial consultation, please contact us on 0207 7611 4848 and for more information about angel investors please visit the UK Business Angels Association website.