Do Business Angels provide a genuine opportunity or are they the latest scam?
Small business owners seeking additional funding are having a very hard time in 2010 with the established VC firms only interested in £5m plus deals and most banks having effectively shut the doors on new lending.
Business angels can be a useful source of early stage funding or at a time of significant expansion and while individuals may only invest quite small amounts they will often group together in a syndicate to provide larger sums.
There are advantages to using business angels as they:
• expect to lose a proportion of their investments – indicating they are prepared to take risks
• often conduct only cursory research – preferring to rely on their well honed business instincts
• usually only require relatively few meetings – rather than the ten or more most VC firms seem to need so they are a useful resource well worth cultivating.
However, like all successful sectors the scammers are moving in and small business owners can be particularly vulnerable if they are having difficulties raising funds and like most scams success relies on getting a small sum from a large number of victims.
So if you have any doubts about offers of introductions to investors – especially online for a fee of, say, £99 – take care as it may not be all it appears.
Legitimate business angels and the organisations that represent them are best contacted via a reputable intermediary that will be able to guide you towards those most likely to be sympathetic to your aims.
Don’t get caught up in a scam – raising funds is difficult enough already!
If you’ve had a bad experience dealing with potential investors, let us know – we’d love to hear from you.
