30 Sep 09 Internet Business Start Up Investor Finance
Start Up Investor Finance
Financing your internet start up business can be solved by getting an investor for your. When considering taking on board an investor you need to make a decision which type of investor to target. There are two main types of start-up / early stage investors; business angels and venture capitalists.
Business Angel Investors – usually wealthy individuals that provide financial capital for start-up and early stage businesses, these types of investors will finance from an individual basis or as part of an ‘Angel Network’ (were individual investors group together with other angel investors to pool their capital). There are roughly around 5000 angel investors in the UK and the average investment from an angel investor is around the £45,000 mark.
Venture Capitalists – usually an investment company that not only invests money into the new business but also brings managerial and technical expertise, venture capitalists will usually want control of the decision making process within the early stage business utilising its own experience and skill sets and invest from £50,000 upwards. A Venture capital investment is notoriously hard to get with over 98% of applications being declined as the requirements from the main venture companies are quite stringent, they tend only to go for early stage companies that are developing or utilising new technologies, that offer a very fast revenue growth and have a robust e-business model.
Finding an Investor For Your Internet Start Up Business
Finding investors that are willing to invest in your internet business start up can be tricky but as long as you have a solid e-business model which clearly shows the market and profitability of your start-up idea you will have a good chance of attracting the investment you need. Most investors will invest if they see the following:
1. Background experience and expertise, it’s important to show an investor you know the market segment, marketplace and have a good understanding of the product/service you are about to launch.
2. A finance investor will want to see a very strong ‘value proposition’ for your business which includes, target market, competitor edge and USP, online consumer revenue spend and consumer need.
3. A start up business investor will also want to see a strong revenue model based on realistic figures and one that shows a clear profit which an investor could find attractive.
4. A clear ‘exit strategy’ which allows the investor to make money, get out and move on. Investors will want to earn money as quickly as possible however make sure your exit strategy doesn’t leave you high-and-dry.
Searching for the right investor can be done utilising several recognised online sources such as the British Business Angels Association or the British Venture Capitalist Association, you can also seek investment advice from the Government which can help you understand the pros and cons of securing start-up business investment.
Enter the Dragons Den
Another avenue is to take part in the famous Dragons Den were you can apply to take part in the reality-based TV investors show which, if nothing else, will secure you lots of publicity about your new start up business and if the Dragons Den investors like your start up idea then you will also get your investment!
Investor Search Pitfalls:
Empty Investor Sites
Be careful when looking for investors online not to waste your money on some of the empty-shell-investor-sites that require you to spend money in the form of a registration fee to gain access to their list of investors – only to find that there are no investors signed up on the back-end!
Extortionate Investor Management Consultants
The other area which can catch people out and cost them money is the so called ‘investor middlemen’ that will try to convince you that without their professional help putting together a proper investor-likable business proposition you will fail to get any investment – as this is not true.
Protect Your Internet Business Idea
If you decide to post your business idea on one of the investor forums or send your idea into investor management consultant companies you’re going to have to disclose your business idea to a large extent. In doing so you potentially open the door for other people to take your idea. In reality there is not a lot you can do about this as an investor will want to know everything about your start-up business before making a decision to invest however there are certain steps you can take to try to add some protection, to view the various ways you can protect your business idea click here.
Investment search and advice:
Angel Investor Forum
Keiretsu Forum
Angel Investment Network
Dragons Den Investors Receive A Pitch:
Tags: Investor Finance
Reader's Comments
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Do business angels normally take a % of your business or do some happily invest just the money for a healthy return? Any knowledge/experiences would be great to hear, thanks!