Cheap Used Cars » Angel investor

How to Effectively Make a Deal With Investors Through Your Presentation

davidguide — Fri, 02 Oct 2009 08:48:45 +0000

Start up investments and early business age developments appeal to angel investors a lot. Moreover, these types of business and those that are struggling for survival and revival need investors.

Presentation of the business ideas to investors that will help with the continuity of the business operations can make a huge difference.

The help from angel investors can provide the company with advisors experienced in the field of business. It is normal for any company to experience financial or management obstacles and experienced angel investors can add assurance to the company’s success. Whether the company is struggling or starting the qualities of experienced investors who are patient, willingness to mentor and risk-tolerant can be very encouraging.

Finding angel investors may be easy but convincing them to invest in your company will require you to apply some strategies:

• Assurance of big return of investments

Angel investors do not only look forward to getting their money returned. They are looking forward to profit returns of their investments. If you can show and assure investments in your company with hefty returns on investments, you can easily convince investors to take part in your company any time.

• Rationality of investments

Any experienced investors would want to have a legitimate motivation to invest in your company. In return, the angel investor will be willing to help build and make the business develop economically.

• A convincing business proposal and promising pitch

Any capitalist of business must practice and improve their pitch. If you have done your homework, you will be able to present a desirable entrepreneur’s plan. It will be very clear to investors that you have a solid plan and pitch if you can be able to provide detailed objectives of the business. A good proposal or pitch must include marketing plans, financial projections and target market. An angel capital will be a sure shot with a great business proposal.

• Solid management team in the company

Skilled and experienced team of managers must be presented to investors. It provides a sense of security to know that the investments made in your company are handled by capable people. The solid management team also shows bigger chance of success in the company’s ventures. It is also a sign of a properly structured business.

• Precise exit strategy

Time frame for the investment is important to be defined when making the proposal to the investors. Moreover, this will help both entrepreneurs and investors to meet in the anticipation of exit.

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Creative Business Financing For Today’s Economic Environment

davidguide — Wed, 08 Apr 2009 21:25:08 +0000

photo credit: irrezolu

In these uncertain economic times, emerging franchise companies are finding it difficult to fund their franchise expansion strategies. Traditionally, franchise companies fund their startup and expansion in one of two ways:

1. By the Shoe String. Start up and expansion funds come from friends, family, home equity, and credit cards (although many of these traditional funding sources are hard to obtain these days). If all the stars align correctly, this initial capitalization bridges the gap until internally generated cash flow is able to fund future growth.

2. Institutional Capital. There are two sources of institutional capital – (1) loans and (2) venture or angel funding. Loans generally originate with banks. Loans often require significant collateral and personal guarantees. Institutional investors traditionally do not invest in franchise companies because they do not “get franchising”. Although in recent years, this trend is changing as some institutional investors are funding more established franchise companies’ expansion strategies. Angel investors do make investments in franchise companies, but often require a significant amount of control, which some franchise entrepreneurs find objectionable.

A franchise company has two assets of intrinsic value: (1) intellectual property which constitutes the “franchise system;” and (2) the geographical franchise territory. Many franchisors do not realize that the opportunity to fund their start up and expansion costs can be obtained without borrowing or selling equity by leveraging these assets.

Structural Funding

Structural funding is a financing mechanism that creates capital through sale of a franchise company’s intellectual property and geographic territory. This can be compared to a sale/leaseback of a company’s real estate to generate cash. Combine the sale of these assets with the implementation of an organizational structure that shifts operational costs and support responsibilities to a strategic partner, and you have an innovative strategy which can be used to completely fund a franchise company’s start up and growth strategy.

There is no right or wrong funding solution. Each has its own advantages and disadvantages. However, Structural Funding is not reviewed by loan or investor committees. It is more akin to simply finding a good partner.

How an Area Representative Structure Works

There are five elements in successfully structuring an Area Representative Franchise Growth Strategy:

1. Value Creation. The sale of intellectual property and geographical territory is the mechanism that generates revenue in the form of Initial Area Representative (AR) Franchise Fees. The initial fees can range from $50,000 to $300,000+ per territory, depending on the complexity of the franchise system and the size of the geographical territory being awarded. These fees are deployed by the franchiser to market the AR strategy, underwrite the training and support of AR, and to offset other operational costs in managing the franchise company and the Area Representative Program.

2. Royalty Sharing. The sharing of royalties creates a business arrangement in which much of the operational and support responsibilities are transferred to the AR Strategic Partner. The royalty sharing percentage can range from 40% to 75%, depending on the scope of support the AR is responsible for providing to franchisees. Some agreements delegate all training, opening, and ongoing support to the AR, and in other situations the franchiser retains training and opening responsibilities, and only field support is the responsibility of the AR.

3. The Right Franchise Development Schedule. Frequently, franchisers are too aggressive in establishing unit franchise development schedules. If a development schedule is too aggressive, an AR may award franchises to marginally qualified franchise candidates, simply to meet the development schedule.

4. Recruiting Mr. Right. In my experience, an adequately capitalized sales-oriented individual is a better AR candidate than a well capitalized resumé rich senior corporate executive. Talented operational individuals can be recruited more easily than a franchisee centric motivator and sales oriented executive.

5. The Right Support Infrastructure. Most franchisors who implement an Area Representative Program use the same support system and personnel that they use to support their franchisee network. This is a huge mistake. Franchisees and AR are two distinct constituencies, and need the appropriate support system that is focused on their needs.

A properly executed Area Representative Program will lead to brand dominance and over the long term crush competition which leads to profitable franchisees. These profitable franchisees generally provide a higher quality customer service, which creates customers, leading to even more brand dominance and more profits, which attracts more franchisees and the cycle continues. All of this is made possible by adopting the Structural Funding Strategy and properly executing the Area Representative Franchise Growth Strategy.

Where and How to Find Angel Investors

davidguide — Wed, 24 Dec 2008 07:06:18 +0000

photo credit: Kevin N. Murphy

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.

For a starting up company, it is essential to get individual investors like the angel investors. This is the best way in acquiring venture capital to develop and strengthen the company immediately. On the other hand, you must be willing to welcome outsiders in your company as well as provide them with some control they can be in command. It will be wise though to provide a way of exit such as buyout from other larger firms or public offering for the angel investors. With such eventual exits provided, you can easily attract angel investors into getting involved in your company.

As a start up company, you must also be aware that there are many potential angel investors for your company. However, they will be costly and will require a lot of negotiation to acquire them as investors in your company. They commonly require different terms in their investments.
Finding angel investors can be a hard task if you do not know where to find them. Nevertheless, once you discover where to find them, the hard work will surely be worth it. Here are some places for you to look for your angel investors:

• Some universities with business programs are a good place to start. This is where angel investors usually hang out since there are high levels of start up business activities the university produce. It will be a good step to contact the people running the entrepreneur program of the universities in your area. They can surely point you to a prospective angel investor easily.

• Business incubators offer access to the angel investors to companies that may have a need for them. Contact association of business incubators in your area and you will find a big vine of angel investors to choose from.

• Groups, clubs and confederacies of angel investors have been around since 1990s. All the members of such associations are all looking for business deals available for them.

Now that you know where to find angel investors you need, it is time to take action:

1. Get information from your chamber of commerce and find out if a venture capital group is being hosted in your area.

2. Ask your accountant, lawyer and some professional venture capitalists for information where to find partners that handle entrepreneurial services and investors you need.

3. Communicate with any small businesses’ development center’s directors about groups of angel investors that may be interested to take part in your start up company.

4. Regional and state economic development agency can also provide you with information on angel investor groups.

5. Check out the initial public offerings or IPO sections for prospectuses for those companies in your area. The bank is also a good place to inquire for angel investors.