Page 22 - Start Up_Genesis

NAVIGATING ANGEL

AND

VENTURE CAPITAL

Mainga Munsanje- Staff Writer

any business ideas today have failed to translate into workable money
generating ventures because entrepreneurs do not have sufficient knowledge
Mon how to finance their business. Most existing seed stage firms avoid the
acquisition of loans and equity capital initiatives; opting to use generated cash. Other
businesses, however, realize broader opportunities for growth. They at some point seek to
integrate their revenues with debt financing and equity capital from external investors to
finance their growth.
Angel investors and venture capitalists are the two most immediate sources of equity
capital that come from people outside the business after friends and relatives. You can
connect with them and discusses the pros and cons of taking their money.
An angel investor is a wealthy individual, businessperson, professional or group of
individuals who provide(s) early stage financing to startup businesses for ownership equity
or convertible debt or both.Venture Capital (VC) financing involves whole firm–investors,
board members, and people whose firm seeks an equity position. These can take shares and
have a voice in how your business should be run.
Angels provide financing for startup firms that are small in their revenue potential. These
investors usually take calculated risks in firms that are deemed too risky to get bank loans
and are too unattractive for most VC firms. Their motivation is to help less experienced
businesses within their sector.
Besides money, angel investors can offer advice and feedback when a startup needs it. They
also have valuable and reliable local networks ranging from legal, accounting and banking
services to suppliers, key employees, or office space. However, connecting with angels
might prove cumbersome because unlike VC firms, angels do not advertise themselves,
and they keep their investment activities within their circle of trusted associates.
To connect with them, local or regional business should search for local angels. The Angel
Capital Association website also provides a directory of angel groups and platforms by
region. Another way to reach local angels is to find a way into their network, through your
firm’s lawyer, accountant, or other entrepreneurs. To persuade them, your firm needs to
target angels in professions related to your enterprise. You also need to have a solid business
plan, and a team with relevant knowledge and experiences to prove your credibility.

19