Angel Network
Business Angels are individuals or groups of individuals who put money into start ups or small businesses. Each individual deal is unique and worked out between the companies and the Angels. Usually the Angels take a stake in the company, they will often give input on areas of the business that they know well and help it to achieve growth; sometimes they will also advance a loan on commercial terms as part of the deal process.
Most small business owners that I have talked to struggle to find finance when they need it, and equally most people that I have come across who are involved in financing small companies struggle to find the right businesses to finance. If you can find a way to put the two groups together then there is definitely money to be made.
I have a group of friends and associates who have put money into small businesses and seem to be always on the look out for more opportunities. I also met a girl last year who was the exact opposite, because of her studies she had come across a number of small business owners, and in fact a whole government body that were struggling to find suitable Angels for their small businesses. The point being that neither group seems to clearly understand how to find the other.
If you don’t have any money you can still make money from this idea by taking a fee from the companies that you find finance for either as cash or equity. You may also be able to charge the investors but I haven’t seen that pulled off yet. I had the idea of starting a club and charging membership for would be investors but never got this off of the ground.
Whether you are interested in financing small enterprises or would like to set up an introduction service for people that do, the following advice should help: -
Network
Chat Rooms/BBS
Website
Government Agencies
Most of my friends who have invested in small businesses have done so because their friends or family asked directly for help, or knew they were looking for opportunities and put them in touch with people. In short, if you are looking to provide finance for entrepreneurs then you need to tell everyone you know that is what you do.
There are lots of chat rooms and bulletin boards for would be entrepreneurs, small business owners and franchisees. Have a look at www.youngentrepreneur.com and www.smallbusinessbrief.com/forum for starters. There is plenty of crap out there but there are also some genuine people looking for advice on how to get started, or to expand. Be wary of anyone who is outright asking for cash but if you build up a relationship with someone and think you may be able to work together then go for it.
If you build a website for your angels business you will soon have visitors coming to you through the search engines. This was how I ultimately got in touch with the government ministry last year. There was no one but me under a search for “Angel Finance Hong Kong”, which is probably a good tip for key words if you are looking to get into this business. Make your website informative and offer links to related sites where your potential customers can find more information.
Given that my strongest source of leads came from the Cyberport in Hong Kong which was set up as an incubator project and has about 70 businesses at any one time working there with government sponsorship I would highly recommend making a direct approach to government departments and non-profit organisations such as the Prince's Trust in the UK who might be interested in putting you together with some of their promising business owners. A little research online will help you to find out what kind of organisation are operating in your area.
Given that all the advice above is about finding business owners/entrepreneurs for people with money, let’s assume that your stock in this case is money.
Surprisingly finding money is not as hard as you think. Many people right now are worried about the stock market and the housing market and are looking for alternative investments. If you put the word out that you are doing this you will find people who are interested through your own network. It is amazing how many people have told me that they would be interested in investing if I come up with anything interesting.
Once you have some cash investors available you can work with banks and other institutions to find more cash.
If you are prepared to help the business owners to put together their pitch, business plan etc. then you stand a good chance of gaining access to funds for which they have already been turned down. If you are not already confident about this then try a few times and you will soon gain the experience that you need.
Be clear on what you want to finance and be prepared to help business owners understand what you need to make a decision.
Spend some money on a lawyer before you put any agreements together. If you can’t afford this, then this is not the business for you.
Don’t advertise that you are looking for investors without taking legal advice. There are strict rules on making offers to the public for investments.
I dropped out of this business because I didn’t like asking people for money. I still invest in small ventures from time to time and occasionally pass a venture on to friends to look at.