If you have heard of angel investors, you would know that they are those individual investors that can make your business succeed. However, you must understand that these investors are looking for companies that can exhibit high growth, synergy and success with the business they will involve themselves with.
Category Archives: Venture Capital
5 Questions on Venture Capital Funding
In this post, we will answer 5 Questions on Venture Capital Investment, that we have seen from early stage companies seeking Venture Capital funding. The above video also expresses similar views.
Q1: How does Venture capital work?
Answer: Venture capital is the term used for unsecured equity funding by specialist investment firms (often focusing on a few sectors) in return for a part of the equity in the company being funded. Venture capital investments carry considerable risk because they are unsecured and it is estimates that only 1 in 10 early stage companies generates good profits.
Q2: How much equity stake do VCs usually take?
Answer: The most common equity stakes taken seem to be in the range of 20-50%, which ensure that if the company succeeds, then the VC makes a good return. Over 50% equity investment by any one VC is rare because the risk increases significantly.
Q3. What do a VC expect in return for the equity funding.
Answer: Because only a few ventures actually become profitable, a venture capital company looks for a high return (a compound return of 25% or more) on each plan, largely generated by growth in the share value of the invested company through increasing brand name and also increasing sales. Most VCs also seek a representation on the company’s board, though it is not a guarantee of producing success from the venture. A good VC would be a partner with the entrepreneur. So personal dynamics are very important. VCs help with raising additional money and financial strategy and also executive team strengthening.
Q4: How much time does it take to raise venture capital?
Answer: It takes about 6 months. Raising capital will take longer than you imagine. Plan for 6 months, and think beyond initial funding. Set realistic milestones, and keep planning for future capital. Learn from others, including other business owners and investors. If you are looking for funding, you have to be patient. For every VC who invests in your venture, there will be 10 VCs who would say no to you.
Q5: How should we approach the business plan writing?
Answer: When it comes business plans, you need a crisp 1-2 page executive summary and it must show a good story of what you want to achieve and what resources you have and what you are looking for. The more you precisely know your Haves and Have Nots, the better your business plan. So don’t get trapped in a 50 business plan that’s full of all kinds of data and it never completes itself.
A long business plan is not a good idea if the same message can be expressed in a couple of pages. Don’t confuse number of pages with clarity of thoughts. Go ahead with a business plan that’s brief and present a coherent logic that interests to the VC. Be honest on things you don’t know. Investors appreciate people who are transparent.
If you are looking to write a business plan, then use this website: BusinessPlan247.com
5 Questions With Warrent Buffet
Warren Buffet doesn’t have to prove anything to anyone because his performance numbers speak for themselves. And that’s what makes it so interesting to hear him take Q&A: “The nastier the better”… as he says!
It’s a long video… if you are in a rush, here’s our summary of the various Q&A:
Q1. What do you look for in the people you like to work with?
WB: I like to work with people I like. I don’t look at their CVs or Grades to decide who can do what. In fact, I don’t even look if they have a degree. If you are working with people you don’t enjoy, please do yourself a favour, and leave the job and work with people you like. You’ll do better.
Q2. What kind of businesses do you like to invest in?
WB: I want to invest in businesses that are stable and where I can visualize it 10 years from now. Companies like Coke (soft drinks), Gillette (mens shaving blades) are examples of my investment choices. There are many others like GEICO (automotive insurance), Nebraska Furniture Mart (maximum sales from a single store location in the US), Iscar Metalworking Company (an industry leader in metal-cutting tools from Israel). I don’t have the understanding of technology-intensive business like software etc, and I stay away from them.
Q3. How do you do business valuation? How detailed is it?
WB: I like to invest in businesses where I have great comfort with the business owner. A paragraph is often sufficient to know the business value. The example being Nebraska Furniture Mart owned by Mrs. Rose Blumpkin, who recently turned 101 years, who has no formal education but has great common sense.
Q4. Tell us some of your bad decisions and what you learned from them?
WB: I invested in US Air though it was a difficult sector. Call it Temporary Insanity. I have learned that my bad decisions have happened when I had more cash than necessary. The airline industry is one step forward for mankind, a giant step backward for capitalism! And then there are other mistakes that conventional accounting does not capture, like the selling of 5% stake in Walt Disney (at $6m) within a year of buying it (at $4mn) in the 1960s. Today that stake is worth over a billion dollars.
Q5. Why not split the Berkshire Hathaway share to make it more affordable to investors?
WB: I think of my investors as a club or an audience in my presentation and we want long-term investors not traders. I don’t want high trading volumes for our shares. In fact, I will be happy with no trading at all. Our share price ($25k per share in recent times) has helped us maintain that seriousness and attract long-term investors.
Thanks for coming by!
MyOrbit Team
Profile Of The Typical Angel Investor
We first heard the term “angel” in the early 1900’s used to describe investors on Broadway who invested in theatrical productions. Today it refers to high net worth individuals who are “accredited” investors under the SEC rule 501 who invest in companies in early stage rounds of growth.
The Role of an Angel Investor
Angel Investors play a crucial role in a business’ life cycle and the U.S economy. For example, when at the Seed and Start-up stages of a new company, the capital that an Angel Investor can provide will add valuable growth and expansion for the early business. If an Angel Investor is active in day-to-day operations, or as a board member, even more benefits and experience can be added to the young entrepreneurial endeavor or management team. Without this help, many novice entrepreneurs may never build large thriving businesses.
Angel investment bridges the gap for companies that are pulling themselves up by the bootstraps (bootstrapping) to later seek institutional funding; it covers a broader area of different stages of business. This is partly due to the many types of Angel Investors. The four primary types of Angel Investors are the following: Passive Angels, Professional Angels, Active Angels, and Super Active Angels.
Passive Angels will most likely invest through a fund or through a Private Placement Memorandum, without direct involvement with the company. When the entrepreneur is at the Seed Stage, and has the least amount of money to spend on services, then the work done by a Professional Angel will have the most value. Professional Angels invest time into an entrepreneurial endeavor in exchange for shares. Active or Super Angels may even get involved during the Start-up Stage and strategically build the company throughout this critical point, and continue all the way through to the Expansion Stage, in which case they will exit as part of the capital influx. One of the most substantial benefits of a company having an Active Angel on their side is the wealth of experience that the investor will have with actively growing businesses. These Active Angels are able to cut years off the normal Business Life Cycle and set the stage for institutional Investors.
Less than 1% of companies have reached the pinnacle of being a Market-Maker Mega Company without the use of Venture Capital; however, seeking out Venture Capital is incredibly risky, and many can’t make it. Angel Investors can aid new companies in traveling down the road to mega company success, essentially teaching entrepreneurs how to walk before they run. Venture Capitalists, after all, land further up the Business Life Cycle where expansion and Later-Stage companies possess greater potential, better track records, and larger capital requirements. How these successful companies come to obtain those valuable assets can be traced back, many times over, to Angel Investors.
Karen Rands is President and CEO of Kugarand Holdings LLC, a company that connects entrepreneurs with Angel Investors. Karen got involved in the world of angel investing in 2001. She left corporate world to join one of her clients as their VP and to help them raise their last bit of go-to-market capital. What she did discover is a whole new world of investing. As Karen Rands got more involved in the world of angel investing, she had requests from high net-worth men and women and their money managers to recommend training so they could learn How to be an Angel Investor. In 2003, Karen launched the Learn to Be an Angel Investor (http://www.howtobeanangelinvestor.com) ebook series. Thousands opted in to receive the original drafts. Finally, the first 5 books of that series are available to purchase at http://www.kyrmedia.com Karen Rands’ involvement in the world of angel investing grew with the acquisition of the Network of Business Angels & Investors (http://www.nbai.net) in 2005.
Article Source: https://EzineArticles.com/expert/K_Y_Rands/160381
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