I’m taking a slight departure from my usual blogs about tax strategies and asset protection today.
I had the privilege to be the keynote speaker at the 2009 CEO Summit in Dallas, TX last month. Every CEO had to make $5 mill + per year to be in the room. I learned more from these guys (and a few women!) then I taught them, I swear.
One of the indepth discussion we had offline was regarding what they do with their money. Most of these guys have reached the point with their businesses where they don’t need to fund them so they’re looking for places to invest their money. And invest they do – I don’t think I heard of anyone investing less than $2 million in a deal. They don’t want the little deals, they want big ones.
These guys are the funding behind a lot of the venture capital and angel investor websites and directories that you see. I figure, why not go directly to the guys writing the checks and find out what they are looking for in today’s market.
If you’re looking for money in today’s world, then please read on to see the three big “ah-ha’s” I learned.
There are three big points I walked away with:
What Angels Want #1: Control.
They are looking for control. They would rather buy something outright then take a percentage and if they take a percentage, it’s not a minority. It’s not because they’re greedy. It’s because they know one thing for sure – they know how to make money. They know how to grow and run a business and they’re not so sure you do.
Be prepared to give up control of your company if you’re looking for an angel investor. Period. That’s pretty much always been true and it’s especially true in today’s economic climate.
What Angels Want #2: Profitability.
They know that the credit markets have squeezed small businesses hard. And they are in the business of making money. That means there are a lot of businesses chasing money, and they have that increasingly scarce commodity – credit.
They will demand higher returns.
What Angels Want #3: Demonstrated Track Record.
The biggest thing I heard loud and clear from these angel investors is that they’re not interested in unproven start-up ideas. They want existing companies, with ROI, cash flow and profit. You think real estate has gone down in value – try businesses!
If you have a business idea, the best strategy is to just get it started. Start small, bootstrap until you have a working provable model and then go look for money. (Bootstrap means building a company using the profit and cash flow from the company itself.) It means slower growth, but in today’s world, it’s probably the only way you’ve got a shot at the funding.