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Contributing Authors

	Joe Kennedy Author of The Small Business Owner's Manual
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	Steven D. Strauss Author of The Small Business Bible
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	Tom Severance Author of Business Start-Up Guide
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	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
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Angel Investors

Perhaps the most common form of outside small business investment comes from “angel” investors. Angels are basically any people with money to invest or loan, including business colleagues, friends-of-friends-of-friends, professional investors, or the proverbial rich uncle. These are often semiretired businesspeople with special interests and talents--or best yet, perhaps other small business owners just like yourself.

Groups of angels often work together to examine, invest, and manage new investment opportunities. Here, the “archangel” often directs the relationship with your small business and communicates back to the investor-angels.

Although the relationship here may be less formal, assume that whoever your angels are, they seek high returns from working with hot new business concepts and capable management. In many cases, the angels want to participate in the day-to-day operations of the small business by consulting, teaching, mentoring, and inspiring the company in areas of special expertise. This could be of great benefit.

Angels should at first be approached as venture capital investors: Be prepared to deliver a formal business plan and a ready-for-prime-time presentation on why your small business is a great money-making opportunity. Also, suggest an investment vehicle such as stock ownership with a cash-out plan, or a high-interest loan convertible to stock. It doesn’t look professional to say, “We’ll consider any idea that is fair.”

In many cases, prudent small business owners will demand that before discussing anything, the not-yet verified angel must agree not to divulge, disclose, sell, or commercially benefit from the business concept, except through your small business. In not so nice words, don’t discuss anything before gaining assurances that your idea will not be stolen. (A non-disclosure agreement dealing with this subject may be downloaded from www.TheSmallBusinessOwnersManual.com.)

Finding and romancing an angel is an art; the relationship is by definition special and apart from that with more formal venture capitalists, SBICs, and others. The best way to find an angel is to work your social and business circles, pound the telephones, and employ conventional networking techniques.

Angels are normally hard-nosed investors with plenty of options, so the deal must make sense; but personal factors come into play if the business plan and personal chemistry are especially attractive. Here, these investors may be the best financing alternative by providing great energy under attractive financing terms.