Dragons' Den (or Sharks' Tank in the US) is one of the BBC's great success stories, and has certainly played its part in propelling entrepreneurship into the mainstream. But as is so often the case with reality TV, it's worth bearing in mind that any resemblance to real life is tenuous. For Business Angels or Angel Investors – the dragons' real world counterparts – it is their money alone, not their celebrity status, that is at stake.
Angel investment is still a mythical world for most people, and few know what really goes on behind those boardroom doors. According to a report by NESTA, UK business angels make an annual return of 22% from their investments, which outperforms the stock exchange, property or bonds, but how do they do it? Are they lucky? Do they have a very calculated approach? Or do they just follow their gut instincts? Throughout my career in this industry I have been privy to what really goes on across the UK's Business Angel Networks, and I've witnessed plenty of exciting businesses failing to attract investment due to a lack of understanding about what Business Angels are really looking for.
Dragons' Den (Photo credit: dullhunk)
Business Angels will look at two distinct areas: the business itself, and the people behind the business. The former is an objective and cold analysis of the investment opportunity being put forward and, importantly, how much the entrepreneur has thought about their own business. The latter is very subjective, and the hardest to get right because it's mostly a matter of the right attitude and chemistry between angel and entrepreneur. One thing entrepreneurs frequently overlook is that although making money is almost always a key decision factor for a Business Angel, it's far from being the only factor that will secure their investment. On top of the financial returns, angels will generally ask themselves the following questions:
1) "Do I like and trust the team?"
Business Angels are spoilt for choice when it comes to investment opportunities, and they can afford to cherry pick the people they work with. Put yourself in their shoes – if you could choose, wouldn't you go for the people that you like, trust and believe have what it takes to deliver? First impressions matter, but it's rare that Business Angels invest off the back of one meeting alone. They will take the time to figure out whether they want to work with an entrepreneur before committing.
2) "How much fun am I going to have?"
Angels enjoy getting involved with new businesses, usually at a strategic rather than full hands-on level, and are looking to have fun while working with new entrepreneurs to create 'the next big thing'. They love the challenge, and they love to work with quality people who are up to that challenge.
3) "Am I proud to support the vision?"
Angels don't have to invest in companies; they do it out of choice. This means that they'll rarely invest in something they are not proud of supporting. Entrepreneurs with a vision to make the world a better place whilst making money will be more likely to raise finance than those planning to profit from exploiting pensioners, no matter how legitimate the business model might be. I remember talking to one of the investors of MitoDys Therapeutics (a drug-discovery platform with a novel approach for treating Parkinson's disease) and her motivation for investing online was the potential social outcome, followed by the potential return.
Over the next few weeks I'll be interviewing some of the UK's most prolific business angels to give Forbes readers a rare insight into their world. Forget everything you think you know about the dragons, and prepare to meet the real people who can make the difference between a successful business, or just a flash in the pan. Follow the journey@goncalotv.
Gonçalo de Vasconcelos is the CEO of SyndicateRoom, an equity crowdfunding platform that allows its members to invest in the same deals that top UK Business Angels are investing in. Follow Gonçalo @goncalotv , @syndicateroom or on SyndicateRoom.
No comments:
Post a Comment