May 9, 2013
Raising Business Angel Investment – European Booklet for Entrepreneurs
Raising Business Angel Investment
European Booklet for Entrepreneurs
This publication is the result of an agreement signed between EBAN and HBAN with the purpose of serving the organisations’ mutual goals of increasing the quantity, quality and success of angel investments in Europe, thus creating a better understanding of angel investment for potential new angel investors and entrepreneurs.
The current document is an adaptation of the original version “Raising Business Angel Investment Insights for Entrepreneurs” which was initially targeted to the Irish market.
The reproduction and/ or adaptation of this guide by other parties is subject to approval of EBAN and HBAN.
2. Equity raising process
3. Top three investment criteria
4. Company executive summary
5. Business plan
6. Funding requirements
7. Valuation and terms of investment
This guide has been prepared to demystify the equity raising process for entrepreneurs. Raising external equity is very different to raising other types of finance.
The following tips are developed further in this guide:
» The relationship between investor and entrepreneur is like a marriage but one with a planned divorce;
» tarting building the relationship early, ideally before you need any money;
» Undertake due diligence on your potential investor and find out what is attractive to them;
» Make sure that every contact with a potential investor addresses the top three investment criteria (management, exit and revenue potential) in some form;
» The best exit is a trade sale for cash…it usually maximises value for all shareholders;
» The revenue potential of your company must demonstrate a scalable business that is capable of producing significant returns for an investor;
» The best business plans have a great executive summary – the point of an executive summary is to succinctly sell the investment opportunity, not to just describe the business;
» A compelling and fully costed business plan is essential;
» Be on top of, and understand, the numbers;
» Founders should have ideally had made or intend to make a cash equity investment in the company, i.e. have ‘skin in the game’;
» Have a realistic valuation expectation – the investor has to make an attractive return on their investment;
» An equity deal is not just about the headline valuation; and
» An apparently attractive high valuation can be undermined by high liquidation preference multiples.
Raising external equity is rewarding and worthwhile if it accelerates the growth of your business. If an external investor is getting an attractive return then you are likely to be getting an even better return.
This is a win-win.