Small Business: What investors look for in a plan
Angel investors are harder to predict. They're usually wealthy individuals or small groups who invest in different ways. Most of them look at almost the same factors as venture capitalists. Some of them, however, will consider lesser investment amounts and will even invest alone. They often specialize in a specific type of business, such as retail or technology, perhaps because they know that sector well.
When it comes to friends and family, I can't tell you what they'll look for because they're your friends and family. I can tell you to be very careful about seeking friends and family to invest in your new venture because businesses frequently fail and you don't want to lose your friends and family when you lose your business. And don't make the deal based on a handshake–you should treat your deals with friends and family just as you would with a professional investor.
I can also tell you that you absolutely must check with an attorney before taking any type of investment for your startup. There are laws that control private investment; most of them were enacted to prevent stock fraud. And selling stock takes significant legal work. Whether you're one of the very few startups that land venture capital investment or you're taking investment from angel investors, friends or family, work closely with an attorney to be sure that any deal you do is structured properly.
Tim Berry is the "Business Plans" coach at Entrepreneur.com and is the president of Palo Alto Software Inc., which produces the industry's leading business planning software, Business Plan Pro, as well as other popular planning applications for businesses.
Copyright 2005 Entrepreneur.com, Inc. All rights reserved.
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