Three Things Entrepreneurs Should Know about Angel InvestingJuly 6, 2010
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Seeking funding from an angel investor can be a daunting task, especially for the first-time entrepreneur who just might have a great idea for the "Next Big Thing." But how does the entrepreneur in need of capital connect with the growing number of Angel investor networks?
Baylor University's Angel Network (BAN), an investor network that provides early-stage capital to entrepreneurs with developed business plans, complete products and early revenue. Castello said there are three things that entrepreneurs should know before seeking an Angel investor:
1) You must have a developed product and plan.
"There are very few Angel investing groups that are going to invest in an idea," Castello said. "Most are going to be looking for some sort of developed product or service, certainly a developed business plan, even if you need some money to get the product going, and some sort of customer base or revenue that you're producing."
2) Do your homework first on Angel investors.
"Entrepreneurs should understand the basics of what they're getting into," Castello advises. "The average person wouldn't go to the bank without knowing what the bank loan process is likely to look like. They should understand the valuation process: they will have to raise 'x' amount of dollars, which will cost them what percentage of their company."
3) Understand that Angels network, too.
"After you've done the first two things - and good entrepreneurs have - find a place where you can get started," Castello said. One of those places is the Angel Capital Association, a trade association that includes the leading angel investment groups in North America. The Baylor Angel Network is a member of the association.
"Many aspiring entrepreneurs may not realize that Angel groups work together all the time, as do venture capital firms," Castello said. "When the Baylor Angel Network looks at a deal and we are very interested in it, we actually will open the door and help syndicate with multiple other Angel groups. A lot of entrepreneurs think you find an Angel and they're going to write you one check. Usually because of their own diversity, they're going to write you one check for so many dollars, and then other Angels will write other checks.
"We routinely cross-syndicate deals across three, four or five different Angel groups. The pool of money will be larger, it spreads out the investors' risks and more people are involved," Castello said.
In addition to providing quality seed and early-stage investment opportunities for accredited angel investors, BAN provides educational and mentoring opportunities for students attending Baylor's Hankamer School of Business. Each angel within BAN contributes a portion of their profits to Baylor, providing a long-term revenue source for the business school. The BAN web site is http://baylor.angelgroups.net/home.
Castello can be reached at (512) 748-1587 or Kevin_Castello@baylor.edu.
Media contact: Lori Fogleman, director of media communications, (254) 710-6275