Starting Your Company with Angels - Can I Trust Them?
There is one typical question I get asked quite a lot from buddies and individuals I meet that are thinking about starting a company here in Japan or aboard. And that concern is - Can I trust an angel investor? For those of you that aren't sure what an angel financier is, they are generally a rich person that wishes to invest straight with a company or specific with a company concept that he/she feels would succeed.
From freedictionary.com, it mentions this:
"A rich investor who offers capital for brand-new company ventures.”
They likewise like to have the ability to control and affect the business to assist it grow and end up being effective; after all they did invest a good part of their personal savings into your concept. Angel investors are the people that want to be more included in aiding the company's growth and partake in the business procedures and activities as opposed to investors that give their money to venture capital companies. Check out this startup-me.ch about Starting Your Company.
The question I often get is, "can I rely on an angel financier?" They ask this question for a variety of factors, a couple of being:.
1.) I don't truly understand this person.
2.) He won’t sign an NDA.
3.) This is a specific as opposed to a company, I do not feel comfortable.
4.) He will steal my concept.
He is investing a lot of his money in you and your concept as well, and that takes a good quantity of trust, faith, or whatever you desire to call it. It's finest to just look at the truths, as that is what he will be doing when he is attempting to decide whether or not to invest in your company and concept. Other than the money he is looking to invest in your company, is he a good match for you and your idea?
Another concern you might have with angel investors is that you will need to disclose your business model/idea with them before she or he even chooses to money your idea. This is why it's essential to first do a little background research study on this individual, see what he has successfully moneyed and what kind of ideas he has actually moneyed. This will help put your mind at ease.
Naturally, individuals are worried if they expose the next best business idea to an unfamiliar person, he or she will just take their idea and execute it themselves. You might have to expose this to really entice the investor to get him/her to invest in your concept. A wise financier, will just agree to fund your concept when he/she understands you have some competitive benefit over the competitors.
Angels WILL NOT sign NDA agreements; the primary reason being because they just can't. Angel investors see company concepts each week and they may stumble upon an idea much like yours and might wind up financing that concept. You may believe he/she took your idea as it is so comparable in nature, however the business he moneyed and the individual or partners he funded had nothing to do with your concept and there were no secrets shared. And the more customized and successful the financier is, the more likely he will encounter comparable concepts. As you can see, there can be all type of issues with this, and therefore, angels seldom sign NDAs. However, if you can get your prospective investor to sign an NDA, by all ways, offer them the paper and pen.
So, should you trust them? Well, as I mentioned above, you need to search for a person that can be referred to you or you feel you can trust after conference and spending time together. I wouldn't necessarily look for an angel financier in the classifieds, although you can, however try to find someone that you satisfy casually that expresses interests in funding businesses. Then discuss your business idea, offer him your elevator pitch, and see what his response is. And always do due diligence. Research this investor more than you would for a prospect speaking with for a role in your company that would be dealing with your most confidential information. After you have actually seen his resume and list of successes and failures, you can then understand whether or not he/she is the angel investor for you.
Clearly if you came up with the idea, you would be the finest to implement and construct that idea into a company and much better yet a successful company. I feel it's uncommon that an angel would just take your idea and try to produce it on his/her own.