Page 215 - Finance for Non-Financial Managers

Siciliano12.qxd 2/8/2003 7:35 AM Page 196
Finance for Non-Financial Managers
196
Angel investor An individual who invests in start-up or
emerging companies for his or her own account, rather
than as part of a formal organization or company. Usually an
individual with some personal wealth and prior management or invest-
ing experience, or both. Sometimes called simply “angels,” these indi-
viduals may seek out investment opportunities on their own, or they
may join groups of other angels in an informal “angel network,” sort of
like an early stage investment club, to find opportunities that appeal to
several members of the group.
potential buyers, or even a few paying customers, the founder
may be in a position to tell a compelling story to potential
investors. These may be individuals who have made some
money beyond what they need for their own personal and busi-
ness use and have set aside some of that money for investing in
other people’s new ideas. These investors are often called
angels because they will often come to the rescue of the entre-
preneur and make an investment when no one else is able or
willing.
Angels don’t do this because they are foolish, but because
they have a greater risk tolerance than other folks and because
their background often makes them uniquely able and willing to
assist a start-up company with ideas, introductions, and
advice—in addition to money.
What Angel Investors Want to See
So, how does an entrepreneur attract the interest of angels?
These potential investors typically are attracted by the following:
• A reasonably well written business plan outlining the con-
cept and the investment premise
• A founder with sufficient business management experi-
ence to convince the investor that he or she can carry out
the promise of the plan
• A demonstration in some form of the product or service,
to allow angels to judge the likelihood of the entrepreneur
achieving what the business plan defines as success