FAQ
What is an Angel Investor?
Angel investors are financially accredited individuals who invest in high-risk, early-stage ventures by reserving a portion of their total investment portfolios to provide emerging companies with seed and startup capital through direct investments. Their goal is to achieve higher returns than the typical public markets provide.
The Breakthrough 307 Investor Group is an active group that provides their time experience as well as offers introductions to valuable contacts, potentially essential to the company’s success. There are many pros and cons of angel investing for the early-stage company, below is a list to help you navigate if angel funding is right for your business.
Pro: Angel Investors are Comfortable with Risk
Unlike a small-business loan with a bank, angel investors typically don’t balk at making a larger investment if they believe in the business’s potential.
Con: Higher Expectations
Angel investors are in the business to make money. It is not unusual for investors to want to see a rate of return equaling 10 times their initial investment within the first 5-7 years.
Pro: Your odds of Success Increase
Breakthrough 307 Investors bring years of experience to the table. The benefit of going with a fund of angel investors as opposed to an individual angel is that the collective knowledge of the group is there to help benefit your business. Researchers from the Harvard Business School found that ventures funded by angel investors are much more likely to stay in business longer, experience significant growth, and see a higher rate of return.
Con: There are Strings Attached
Even though you’re not technically obligated to repay Breakthrough 307 the money that was invested, there is a catch: equity in your company. When you hand over equity in your company as part of the deal, you are essentially giving away part of your future net earnings.
Are you ready for Angel Investment?
Even if you have done your homework and believe that angel investment is right for your business, knowing when you’re ready for that step is key. Below are some questions to determine if the time is right.
Business Plan
Have you developed a comprehensive business plan that articulates your key business strategies for how you will grow your venture?
Management Team
Is your team experienced, driven, coachable, and willing to cede some control and decision-making authority to outside investors?
Target Customer
Do you have an identifiable market segment? Is there a demonstrable and significant demand for your proposed solution?
Market Size
Is the projected spending in your product category large and growing? Can this be a $100 million market?
Technology
Have you proven the concept behind your product or technology? Can this be confirmed with data or by objective experts? Have you built a comprehensive business plan to commercialize the technology?
Profit Potential
Can you demonstrate how high margins (+15%) and consistent cash flow growth will be achieved?
Exit Strategy
Do you have a clear exit strategy that will enable angel investors to generate a return of at least ten times their initial investment?