How much angel investment capital do you need?
By Venture Giant
Angel Investors today have many choices and each part of the angel investment process is an opportunity to assess the capability of the entrepreneur. Determining the amount of angel funding that your business requires is one of the most important steps in the process.
Many small businesses have failed simply because they were undercapitalised. Asking too little could negatively impact the operation of the business, which the angel investor may view as your inability to manage effectively. Do your due diligence and thrive for accuracy when determining the required amount. Check and double check the start up costs of the business and avoid making wrong assumptions and poor cost estimates.
There are a number of factors that need to be considered and if you're not sure, it would be wise to enlist the help of a trusted advisor. Failing to notice changes in the business environment or ignoring those changes can have dramatic negative effects on the business in a very short time. A seasoned angel investor will recognize this and once they confirm that you have underestimated the start up costs of your business, they will quickly lose interest in your investment proposal.
Another pitfall to avoid is overestimating the angel business funding requirements. Oftentimes entrepreneurs starting a business think they need more than they actually do especially when they think it is easy to obtain. Eventually the reality sets in that there are far more entrepreneurs looking for funding than there are angel Investors willing to provide it. If you ask for too much, you could also price yourself out of an angel investor's funding range or what an angel investor is willing to invest based on what he or she feels is actually required.
Angel Investors have choices and as difficult as starting a business is, obtaining the necessary capital investment can be a huge challenge. Whatever the amount you are looking for, be as realistic as you can. Once again it's performing your own due diligence in order to come up with the right amount to ask from an angel investor.
In the US, a recent study of over 500 angel investors, it was determined that each individual angel investor’s median investment was $50,000, and the mean investment was $191,000, per venture.
This means that if you are seeking less than £5,000 angel investment you are better off asking friends or family.
If you are looking for investment capital between £5,000 and £50,000, although this is in the low range of most angel investors they will still look for justification of the amount. Angel investors are smart business people who have been there; done that and so it's important that the entrepreneur does their due diligence in determining the true funding needs of the business.
If you need between £200k - £1 million this is in the high range of most Angel investors and they will look for solid justification of the amount and you will likely need several angel investors. If you need more than £1 million, know that this is outside the comfort range of most individual angel investors and most likely will require the combined investment resources of an angel investment group. Even though they may have the resources they will definitely look for justification of the amount. For this amount you will most likely need a Venture Capital firm.
Venture Giant Insider Edge:
Most important of all, always, know your facts and be able to cite supporting documentation for the investment capital you are seeking to raise.
Venture Giant is a premier UK business Angel investment network and small to mid sized business networking portal that matches active business angel investors with entrepreneurs' seeking investment capital and business funding.
Written for and behalf of Venture Giant Enterprises Ltd. All rights reserved 2009
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