Angels at your shoulder can help guide venture

Does your business have what it takes to attract an angel investor?

An angel is an affluent individual who risks his or her money to invest in a startup company either individually or in a group to spread the risk.

When a bank says no, particularly in this tight-fisted lending environment, an angel who sees genius in a venture may say yes and invest.

But they do expect a big return on their investment in exchange for the risks they take.

Angels most often are experienced businesspeople, Richmond SCORE counselor Hardy Koska said. That's an advantage for new entrepreneurs, who can benefit from the advice of seasoned mentors and advisers.

An angel will take an equity position in your business and expect to be brought out with a profit typically in five years, Koska said.

"The disadvantage is you do have people looking over your shoulder giving advice," he said.

If you succeed in getting an audience with a panel of angels, you and a handful of other entrepreneurs also competing for their money will get to make a fast PowerPoint presentation, perhaps 15 minutes, and then answer questions for another 10 minutes or so.

Is your business likely to attract an angel investor? Different angels have different expectations.

But they may be attracted if:

• Your venture is likely to return 10 times to 30 times the angel's investment in three years to five years.

"If we believe you can get there, we will invest in you," said Letitia Green, managing partner and co-founder of the Virginia Active Angel Network LLC, a group in the Blacksburg-Roanoke, Charlottesville and Richmond areas that invests in beginning and early-stage companies in a variety of business sectors.

Its Web site is http://www.virginiaactiveangelnetwork.com.

• Millions of people are likely to need or use your product or service.

The return on the investment has a higher likelihood with a greater market size, Green said.

• Your business has some structure.

You have at least a small-business attorney, accountant, a business plan and a PowerPoint presentation, Green said. If you're not at that stage, you're not ready to approach an angel, she said.

• As an entrepreneur, you are teachable -- and not arrogant.

An arrogant entrepreneur is not someone an angel will want to give money to, Green said. "We're partners and everybody has to listen. Otherwise, it won't be fun."

Angels also look for superior management. "That's one of those things you only know when you see it," she said.

• You've lowered your perceived risk.

You're likely to turn the heads of angels if you've already lined up key customers, tested a prototype or put key employees in place, said Joseph Bell, the Arkansas author of "Finding an Angel Investor in a Day."

• You have some skin in the game.

Investors want you to personally invest in your company -- and perhaps get your friends or family members -- said the Angel Capital Education Foundation in Kansas, an angel group trade association.

• You have an exit plan for the company.

It may involve selling the company or buying you out if a new CEO is brought in, the foundation said.

• You have a concise business plan and executive summary.

In them, you clearly articulate the readiness of your market, the strength of your management team, how you intend to overcome obstacles and the company's potential for producing big revenues fast, angel experts say.

• You've developed an exciting presentation.

With just minutes allotted to convince a panel of angels, start with a presentation that contains 10 to 15 slides outlining your product, market, management team and why you think your product will sell.

Practice the presentation in front of a few people that you trust, get their feedback and then tweak it before going live before angels.

Contact Iris Taylor at (804) 649-6349 or .