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Dreaming of your own Niche business?
Becoming an entrepreneur isn’t everyone’s cup of tea. Managing & operating a business is not easy work, it needs a lot of charisma, perseverance, logical thinking, and a good head on your shoulders.
I for one would know how hard I worked and the very long hours I had to put in for years, to build my niche business, get recognition to finally reach the pinnacle of stability and success.
Many challenges and obstacles were faced, and many keep coming my way. Business is a type of art. Once you recognise your own strengths & weaknesses, form the right team, get guided the right way, you get into a familiar rhythm. You love it too much to give up and failure is not just an answer.
So, if you think you are up for the challenge, come let’s enjoy not being just an entrepreneur but a successful one at that.
“Every successful entrepreneur has his heart in his business and the business in his heart”
What is a start-up or new business?
A new niche business idea or a company established by an entrepreneur supporting an ascendable and developing business model.
Starting up a niche business idea may have a high rate of uncertainty and face failure but a new business managed, guided, supported with the right attitude, intention and influence, usually grow large and become successful. They even may become unicorns in the industry.
When do you need funding and why?
A start-up has very limited or no operating history and raising capital to commence a business can be extremely challenging. No matter how convincing your personal track record is or how powerful your business proposal is, banks and other financial institutions may hesitate and object to loaning the funds that are required.
In instances such as this, raising funding to give the business the capital it requires to grow and move forward is crucial and essential. Choosing the best and the most suited mode to acquire this capital needs to be decided with much clarity. The funding should not hold you down or tie your wings for further growth or become a burden itself. Think wise and seek expertise to succeed.
How to fund your start-up business for a niche business idea?
You may be a person driven by high perseverance, knowledge, blessed with creativity and all the stamina needed to face the hardships which are bound to come your way. But lacking funds to pounce on your dream?
“Why not let an angel investor aid your dream?”
A start-up has very limited or no operating history and raising capital to commence a business can be extremely challenging. No matter how convincing your personal track record is or how powerful your business proposal is, banks and other financial institutions may hesitate and object to loaning the funds that are required.
In instances such as this, raising funding to give the business the capital it requires to grow and move forward is crucial and essential. Choosing the best and the most suited mode to acquire this capital needs to be decided with much clarity. The funding should not hold you down or tie your wings for further growth or become a burden itself. Think wise and seek expertise to succeed.
How to fund your start-up business for a niche business idea?
- Step 1 – Fine-tune your proposal. The purpose of your business should be made clear. Demonstrate objectives, their value and establish measures of success. Give a clear view of situation analysis.
- Step 2 – Understand the type of investor that you and your business require and create a list of the targeted list of investors.
- Step 3 – Check the investors’ credentials / past records
- Step 4 – Before reaching the investor, ensure that person invests the type and the amount of funding that you require
- Step 5 – Short-list your best choices and make an impression. Angel investors tend to measure the strength of the company’s management. The management of the company should be well prepared to educate the investor/s on the product or service leaving no loopholes.
An Angel Investor to help you grow your business
During the course of my business, I have got in touch with many different investors and sought financial support from banks & institutions. Based on my personal experience, the best and the easiest support I received was from the Angel Investors. They aided me financially without much fuss or hesitation plus guided me on the right path. Their shared wisdom was priceless and one of the reasons for my being successful today.
Who is an angel investor (aka business angel/angel funder/seed investor / informal investor)?
An angel investor is an individual who provides the capital for a start-up business. In return, they would expect convertible debt or ownership equity.
Angel investors rise to support start-up businesses at its commencement while most of the other types of investors may hesitate even to consider an investment.
It can be seen some angel investors investing online through equity crowdfunding or through groups created with other angel investors. These angel networks share investment capital and also furnish advice to new start-up businesses.
During the last decade, the number of angel investors has risen.
“Original thinking, innovation and undying faith in your vision will take you to your end goal but success will only come if you are prepared to listen to your advocates and fine tune the path towards your end goal”
A new business venture requires great commitment, innovation, a perfect team and most of all it requires funds.
“Where your personal resources are already broached to the brim, angel investors come to your aid”.
Never despair if you have a great idea but lack the funds to back-it-up. There is always an angel investor who is willing to offer you the financial support you require.
Why choose an angel investor?
All businesses whether large- or small-scale need funding for its growth and success. Angel investors usually offer their assistance during the early stages of the business.
Based on my personal experience with angel investors, here’s why they are the most sensible choice and how to take the maximum advantage of such a venture.
“You have reached so far so don’t be afraid to present your ideas to your investors. Ask questions, get clarifications, it doesn’t show weakness but adds value and courage to your character”.
Faster process – Angel investors who unlike banks or venture capitalists are more independent in decision making and have fewer people to confer with. They are freer to invest.
Funding – Banks or venture capitalists would release the funds in several installments. But angel investors would release the funds required as a lump sum which may benefit the company’s quick growth.
Experience and expertise – Unlike venture capitalists who are focused on making large profits, angel investors are ready to share their knowledge and expertise and would guide the business adding great value and exposure to the company itself.
Angel investors usually fund businesses they are familiar with; hence they carry a lot of exposure from the industry.
Independence – Angel investors won’t request company board membership. Hence the entrepreneurs have the independence of managing the company.
How can an angel investor help you grow your idea?
“Angel investing does not end with a cheque or a mere handshake. In fact, an angel investor can aid your business to grow its wings”.
Capital – Angel investors will provide the funds which is a fundamental requirement as a lump sum to commence business and its operations right away.
Mentoring – Yours’ isn’t the first investment an angel investor would have invested in. They can presume the future of the business and they foresee opportunities and risks even before they arrive at the doorstep. They will offer their guidance which used wisely will make your business grow successfully.
Angel investors could also advise you on the best business strategies to take your business to the next level.
Network – Angel investors are well seasoned in the industry and have an extensive network of important people in the industry. The alliance with your angel investor may lead to many introductions where another opportunity will arise or will aid to promote your business positively.
Knowing primary parties brings a great impact on your company’s recruitment plan as your associates may offer you good recommendations when hiring your next employee.
How to find and secure an angel investor for your new business
When I started looking for an angel investor, I approached personnel who were already operating businesses with stability.
I was planning to introduce a Field Service Management platform where Field Service operators were able to manage their work using one app and it made more sense and appeal when I suggested people who were already involved in the Field Services industry, operating trades’ businesses to angel invest on my startup innovation. It was a two-way win.
This concept may not work every time, but it is worth giving thought and a try.
Here are a few tips for securing the right angel investor for your start-up business:
Start talking to the right people and start looking at the right places
Let technology help you. Many digital tools are available to source investors. This method is much quicker and comes with several plus points.
These digital platforms allow you to source the most accredited investors by location, type of investments made, industry and enables you to view reviews of other entrepreneurs. Most of these platforms host meetings where entrepreneurs can meet with potential investors.
During your initial conversation with the potential investor weigh the pros & cons and decide if he/ she is the suitable investor for your business. Note if the investor fits your vision & mission and if you both are on the same pages and speak the same language.
Be informed if the investor is interested to aid you on a long-term basis or is planning to make a quick exit at the slightest negative vibe.
If you think the investor is a right fit for you and your business, don’t hesitate. Pitch perfect.
Perfect middleman
A good recommendation can make positive things happen even if you are a newbie to the industry. If you have credible associates who can act as the middleman introducing you to the potential investor, consider yourself lucky.
Referrals are very effective therefore ensure that you inform your associate of all relevant details such as:
- Your profile the way you want it to be presented
- Your company’s vision, mission, what products or services it plans to offer
- The amount of funds you require
Online presence
The more visibility you have the better your chances of attracting an investor. Showcase both your personal and company’s noteworthy information. Remember when you start networking and applying for investors, you in turn come under the spotlight.
Investors will go through your website, social media accounts such as LinkedIn, Facebook and YouTube; Ensure you go through every syllable to make your online presence a professional one.
Identify the popular social platforms and make sure that your company profile is active on each of these platforms.
How to secure the right angel investor
To attract an investor, you need to understand what they expect from you.
- A confident team – A company that has a passionate, credible, reliable team with excellent track records has more chance of winning an investor.
- How you pitch – Ensure you leave no loopholes when preparing & presenting your business plan for the next 1-2 years. Include the vision & mission of the company, your goals, timelines, plan to use funds, market type & strategy, competition awareness, etc; Do sound research and gear yourself to answer any questions the investor may shoot your way.
- Type of product or service – Ensure that your business concept is practical and is in par with the demands of the present consumer. Do some research work and understand the industry and its demands and plan to cater accordingly.
- This fact holds a lot of importance and is the initial detail that your investor would consider. Your presentation should showcase how compatible your idea is.
- Company vision & mission – Your vision & mission should be able to convey your business plan for at least the next 5 -10 years. Market scenarios, how to waylay competitors, strategies for customer growth, further funding, etc;
- Proper preparation – Remember confidence is the key to winning an investor. Never show doubt, have a clear understanding of what you present and how you present.
- Always be prepared & be selective in your investor meetings – You never know when an investor might turn up showing interest, might be totally out of the blue, yet if you have all the required documentation prepared, a fault-proof presentation, have done the research, then there is no need to hesitate to face your potential investor.
Investors tend to discuss with other investors, so be careful with whom you communicate & what you communicate, and how much you give away.
How to pitch perfectly and grab the attention of an angel investor?
The initial step towards a perfect pitch is having a sound business plan. Your business plan should be a shudder and make the investor yearn for more grabbing his/ her interest within the first 5 minutes.
Make sure that you keep your presentation lively or boredom would drag away the interest of the investor no matter how good your plan is.
Presentation & practice – Ensure to include all the necessary information in your presentation in short form. Go through your presentation to assure the accuracy of all facts & figures. Don’t let your presentation run for too long. Keep it short & simple.
Practice your presentation well and omit any difficult words that you think are hard to pronounce or would not remember the definition of. The more you practice the more confidence you gain.
Research the industry you are trying to dive into and have your answers ready for any questions your investor might ask.
Knowledge of the product or service, target market – Have a thorough knowledge about the product or service you intend to cater to, have a solid business development plan. Understand your target market and prepare practical business & sales strategies, market acquisition strategies accordingly to capture the market.
Projection and managing finances & funding – Present your plan on how the funds and revenue will be managed. You should have a projection for the initial 1-2 years and the next 3-6 years separately. Make sure the numbers make sense, as the investors have a lot of experience to know at a glance what’s serious and what’s bluff.
Team – Ensure that your team is reliable and is on the same page as you are. They should share the same passion as you do and have professional knowledge, be innovative to cater to the consumers, and develop the business.
Competition – Be aware of the market competition and it is always wise to do a comparison vs them & you. This will enable you to move a few paces ahead of your competitors. Show your investor why you are different from them and what benefits you can offer.
What are the advantages & disadvantages of an angel investor for a new business?
Advantages
Obtaining financial funding from an angel investor is much less risky than obtaining a loan from banks with high interests. If the business does not succeed, you are not liable to pay back the funds received, unlike loans which need to be settled in full with interest.
Angel investors don’t only concentrate on the profit gain. But they can guide your business by sharing their expertise.
Angel investors know the industry and understand business hence take a long-term view when it comes to analysing the progress and business plan.
Disadvantages
The angel investor will have a say in the business decisions you make.
Communicating, sharing your idea, and getting your potential investors to understand your concept may be time-consuming.
As you grow, it may become difficult keep them informed individually due to time constraint
Key legal issues to consider and documents to be drawn when partnering with the selected angel investor
The hardest hurdle successfully passed; the best angel investor suitable for the start-up business has been selected.
Discussions have been had ending in positive notes and mutual agreements.
How to move forward? What’s the next step? What precautions are to be taken? Be investment-ready! Create a framework where both you and your investor feel comfortable.
In some instances, like mine, only the Company Constitution may be sufficient to commence your relations with the investor. However, the document requirements may differ from one angel investor to another.
These are some of the documents you will need to create and prepare with the aid of a Lawyer.
Investment and shareholders’ agreement – The most important document which binds the contract/agreement between you and your investor. Obtain assistance from a lawyer specialised in that area to draw the agreement covering all required aspects from the initial stages. Typically, an agreement will be valid for 3-5 years from the date of the initial investment. The agreement would entail details such as invested amount, profit sharing details & percentages (shareholdings), protecting the investor’s shareholding, warranties, incentives management, company’s targets to be achieved, termination of the contract, etc.
Articles of association – The articles of association entails transfer of shares, dividends, voting rights, etc.
Disclosure letter – This document disclosures against the warranties stated in the investment and shareholders’ agreement. A disclosure letter will include details such as assignments of intellectual property, service agreements, share option agreements, etc.
Wrapping up
Business Angels invest not only their money but also their expertise into start-up businesses and help them grow and reach success in return for shares in the company.
“If you have a great idea but lacking funds, don’t let it stop you. Angel Investors will give you wings to reach the bright blue sky”.
