submitted by Archie Macanas

Angel Investing

Angel investors don’t lend you money- they acquire equity in your business. The name comes from the wealthy individuals known as "ANGELS" who fund Broadway shows. Angel investment- if we can demystify the terminology, merely refers to an investment from an individual, usually a stranger.

Angel investing is a hot topic on the Internet as I observed, and is sometimes portrayed as a magic bullet for investors who need money. Don’t be fooled, because there’s nothing particularly angelic about the relationship, according to my research. Basically, it involves finding and convincing a wealthy individual… some willing to take a risk buying a chunk of your business, as long as they have only 49% of your business, that’s not enough to take it away from you. Angel investors usually invest close to home, because they insist on direct involvement in the business, and want a high rate of return (20% to 50%) One has to expect that. This is what I found. Angels are also looking for a great team much in the same way that a gambler looks at the horse, the jockey, the trainer, and the owner.

Since Angels don’t lend the money, then what do Angels want? They want a piece of your invention: business- usually represented by corporate shares. Subsequently, your proprietorship will be converted to LLC or Corporation. of course it has to go public.

According to many, on average, angel investors typically receive about 20% equity in the businesses (or inventions) in which they invest. The actual amount an angel pays to your company for an ownership interest depends on how your business is valued. For example, if your business is valued 1Million$, an angel would, as a very general rule, expect to pay 250K$ for a 25% ownership. Much depends on how you deal from the start and how much percentage he will own from the company. Everything should be on paper. A part time lawyer should be hired.

Even I live very close to wealthy people like those in Beverly Hills which is about 4 miles away, however, it’s hard to find them. But I am no quitter… there would be the time my venture will end up one in of their nests.

 

Watch out for fraudulent BROKERS. Because of its popularity, angel financing has spawned a business for angel brokers, finders, or intermediaries… companies that find angel financing with no charges.

Unfortunately, many of these brokers are rip-off artists.Watch out for brokers who charge large up-front fees. When these people are getting more than a few hundreds of dollars from you, that money for sure is going down the drain.

I am attending seminars and meetings sponsored by the Los Angeles Chamber of Commerce 3 times a week for $70.00 which is good for 6 months. Free one on one consultation and mentoring on how to start your business or whatever enterprise you are in.

Please contact or go to their web site http://www.score.org/index.html or try our score here in Los Angeles http://www.scorela.org/

I gathered these info from Bill White one of our recent seminar speakers.

There is no harm trying it out. As they say, nothing ventured, nothing gained.---#

---AM