Rules you need to know while approaching business angels investorsEdit

Alright – you've got a business idea which may work, but you don't have cash. What to do in this situation? If the funds aren't great enough to start (always seek the minimal costs) the business – it's better first to look at your parents, friends or people who are willing to borrow you (however not necessarily banks or other financial institutions) or to enter some kind of partnership. It's very probable that you fail at first, second & even more "business ventures" (I've failed about 45 times until I've learned some knowledge which may could make me successful, with only 1 success [but huge success; however I've failed after it, coming back to 0 or even less], those "failures" were rather small, because I've had on beginning NONE knowledge or didn't even know from where to start; I've never had a mentor or anybody who could help; I've made everything on my own through errors and thinking [example: all this knowledge which is placed here is done only through reading, testing & thinking on my own]). Why? To make sure that when you would fail (you know little or rather: nothing, you've got none experience and the chances you would fail are huge – however good your idea might or is). Without a strong mentor or business partner which made a success you're doomed on failure at first attempts – let's face the truth. Avoid to looking at it – the most important thing is to start. With time you would get the needed experience. It's a smart move to seek somebody who already made it and seek for advice (on other hand: here is the huge risk that you may find a person who would crush you're imaginary world and kill you're innovation & better, faster solutions to the world, but if you're "beginner" – find him).

If you fear and have money it's better to enter something which was validated in the market place – enter a franchise (solution for those people who want to have a quite "safe" investment).

· Business Ideas DATABASE (over 600 ideas, currently)
· How to start your own business NOW from scratch (without nothing)
· How to get clients? (business)
· How to write a best business plan ever? (not-published anywhere knowledge)
· HOW TO SELL, PART I: general rules (introduction)

In other cases (or when you want to make something "own" and/or innovative) – it's very smart move to start writing a business plan – put all your thoughts on paper. However it's not necessary when you've got an invention or something which is completely new (and you've got patent on it!). Getting sample business plan and reading the questions is very good approach, because you're seeing – what is important in the whole process of selling, finding customer and your product. Besides, in 95% cases you need this document, either. It's simple – putting your thoughts on paper.

Also very good advice which could give you advantage when approaching investors is to watch 20-40 episodes of "Dragon Den's" series. You would see how it looks (at least in some cases) and would spot what counts for the investors. It can't be just put in text, you need to watch it, analyze it and do the work.

I would say that the most important thing which I've skipped (unless it's a pizzeria or any similar like business type where chances are higher to succeed, not innovative or ME "&against–with" world, international business) is approaching investors – you must pass the "critics" which would say all the clues in the business and what it won't work and why they not invest – those people are precious. To point it simple: you do the business -> approach business angel fund (send your application) -> you get first the reply from critics (you've got __ALL__ here), ask always for "why not" if they didn't made clear their statement ....... -> then you fix/check/innovate & approach again OR just could skip your idea or rethink it twice. It saves time – you don't do the business, but get an advice from them (you could also set a meeting with them and they would give you an advice – however on the internet it's cheaper, you save time & money, so it's better to send all the applications online to various funds).

Do they can steal your idea? Yes, they could. However in most cases (at least in funds which aren't hiring professionals, only investing in new ideas) they're so much absorbed with their businesses that they won't even put a thought to just steal it (your idea). Furthermore I must say that you're "innovative & best, unique, genius idea" has been already in use, but you don't know it even (90%) or the market is too low (niche that has little potential customers) or you're product is useless. Less than 1% of ideas are unique and really get to the category of the profit making, investment ideas. Without a prototype or patent it's better not to even go to anybody. However you might think that you're idea is the 1% – ignore that and just apply the business plan application to the critics – you would get valuable feedback.

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– I want million and I can give for it 20% of my company. (approach)
The reality in the funds look like this – you don't get usually cash (if you're a startup), they set you a "pension" (minimal one) and they pay everything for you or alternative give me access to the bank account with minimal money for which you can set & pay for all the expenses (however you've better have a invoices for the services or products you buy, just ensure it).

Alternatively when you're company is running and already making profits – just need money for the expansion, they give you really money. HOWEVER, remember that you want to give (or willing to) e.g. 20% of your company for the million, however for investor – you're valuing you're company for a 5 million stake (that is worth already). This is key differential point which you need to be aware off. Investor, commonly doesn't go for the "financial prognosis" or "future earnings", but rather HARD, CHECKED FACTS and you're very probably would end with offer: 1 million for 40 or 50% at least of you're company. Remember that investors aren't charity – they want to make substantial returns on you and if you won't show it to them – they would not invest in you. Is you're company really worth those 5 million, TODAY?

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However I would stay at this point with you're idea. Is it really good? If it is and THEY want to invest in you – take it. Just take it, however make efforts to hold at least 51% of stock (with equal votes, earnings) – don't give them away more than 49% of you're company. If you're smart enough and they need you or you're patent – it's possible. Why? To don't have a situation when a fund from public money invests in you and they get offer to sell you're company for 5 million today, where in 2-3 years it would be worth 25 million and you've worked for all those years. They could do it to you or make bad decisions of the future ways. I would bet on it (however I know that for some people it's the inverse right).

1 rule stays true: it's better to have 51% (or more) of something than 100% of nothing. If you get an offer – take it, in most cases: immediately. Why? Because when you're starting you're business it's smart to just START and not to make too much trouble for yourself unless you've achieved financial independence (if you're approaching business angel funds it's commonly the big/huge market idea which makes you independent financially for a lifetime), however not in all cases. Just don't be rude, start today.

Remember that you're only making money when you sell your products/services to other people. You need to sustain significant amount (volume of sell) to sustain yourself on the market and to make profit. There are two key areas: A. which is PRODUCT – B. which is CUSTOMER. The rule of selling is: "buy/produce cheaper" → SELL at higher price – the rest which you do is your PROFIT (easy & simple). That's all the secret.



… Update 2011-07-24.

Those rules pointed in the article are the basic things you need to know. However, you must/may follow also.

• you must tell the investor you would quit your job and engage fully on the project – the last thing any investor don't want to see is the person who isn't fully dictated / convinced to the project he introduces; also: if you're an inventor – it means often: abandoning all the related projects and sticking only to this one,


• you must know you're numbers – exactly, what you've made in the X-year, Y-year and Z-year; if you don't have them in mind – it's better to (best is to) write them on piece of paper, because you may forget them due to stressful situation; off course – if you don't know the basics of the business like the distinction between the revenue & profit – you may be in a serious trouble


• you must also have the precise knowledge on what you need the money – telling that you would put it on a party it's dooming idea (you won't never get them); the investor must need to know that the money won't be blown and you must be trustworthy


• remember that inability to present you're pitch or lack of confidence may cause you rejection of the offer (people often find out that everything just disappears from your mind – when they need to present the business article in the front of people); so, please – make yourself training "public speaking" in e.g. front of family or mirror; also DON'T learn yourself the pitch on memory – write 5 points, e.g. PROBLEM (x initial, my story), SOLUTION, etc. etc) <--- in point, it could be a word, which you would remind of you – what you want to say (some kind of PLAN of presentation), take this paper with yourself


• you need to know all your competitors, market & have the knowledge on maybe not everything, but to the point you need to convince the investor to put money into you; remember that you're the key-person and it's YOURS business, not the investor business – what you only need is his money (& maybe guidance), but just don't count that everything would be done by him in YOUR business of which has got share and wants to get substantial return; most of people think that they would get an investor where they've got no lack of knowledge, "little" product & belief that they're product is good; it doesn't works this way – you need to show investor that he would make money, not the investor that would buy you're business as a whole and he would think what to do with it: next (I've hope you've get the point).


• if they ask (obvious) – just answer them those questions they ask; if you don't know the answer, tell straight: "I don't know yet the answer, but I would find out in 10 hours" or something related; just commit to the lack of knowledge, instead of lying or "talking as you would like it to be" (let's say); if you would lie to them – it would be visible later & you could compromise the deal; honesty is what counts; insinuating or insulting them would not help,


• you're goal is to tell exactly what is your business, how you get the customers, what are his earnings & for what & what for would be used the money – exceptionally: how it could look & your ideas, in the near future; objectively, not in skies – investors are rather people who see flaws and know what & when it could/may work and they're rather smarter of you, because they've passed it already; you're only goal is to clearly communicate what is your business and to just be clear: know you're direction & goals, all

Another good idea is to share the vision on putting the business on the market place (stock) to promise and buy the investor high returns. Edit

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