Business Angels - Manual Overview

Section 1 | Section 2 | Section 3 | Section 4 | Section 5

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Section 1: Introduction

The Chris Kaine Philosophy; about the author; acknowledgments. Who will benefit from this manual? Can Australians respond to the needs of innovative Business? The present situation and the need to support Australian business and encourage the Business Angel process.

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Section 2: How to be an Angel

What and who are Business Angels? Are you an Angel? They come in many guises. Investing privately in a company and having personal involvement with owners of the firm requires careful planning and collaboration. Pitfalls to look out for and tips to follow. Why be an Angel? A look at the myriad of ways to structure the investment and involvement. Finding the right business to invest in. Research helps minimise the risk. It is more than a financial investment.

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Section 3: How To Find and Work with an Angel

The aim - business harvest. Common challenges a business faces and how Angels can help. Preparation and planning - the key components to successfully attracting the right Angel. Businesses know that help is needed but is it a financial or skill deficit? Is the company ready to part with equity? Do the key people have the temperament to work with a peer? Forms of Angel help. Managing planned growth. Succession readiness. Accounting advice. Angels are not all angels. Searching for the right Angel. Investor readiness.

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Section 4: Practical Information

The Business Angels process has many advantages for business and Angel, but must be approached carefully. Practical advice includes how Angels and businesses can meet, how to conduct initial meetings, how to assess the opportunity and risk, the benefits of facilitators, the importance of formal agreements, setting up the partnership. What are the personal qualities needed to build and maintain a good working relationship? How do you provide exit strategies to successfully conclude the partnership?

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Section 5:

Appendix; Business Angel and business capacity mapping checklist; Ideal characteristics; Glossary; Further reading and references; Contacts; Index

Because business enterprises are to be found throughout our society, the manual will be of use to:

local government bodies
Chambers of Commerce
regional economic development organisations
private business collectives
rural enterprises and cooperatives
expanding small to medium sized businesses and budding entrepreneurs
accountants and solicitors
economists
volunteer organisations and groups
service clubs
students
financial advisers
business consultants
outplacement consultants
those seeking self employment in private companies
women and men seeking ways to re-enter the workforce.

Please Note:

Investment in another person's business, especially new business, carries high risks. It is highly speculative and before investing in any project about which information is given, prospective investors are strongly advised to take appropriate professional advice.
Business owners are also urged to check the credentials of investors and also seek appropriate professional advice.

Given the risk involved in investing in small private companies great care must be taken by all the players. Each of us must accept the responsibility for our choices. To make these choices without thorough research and advice is pure folly.

"The formal venture capital industry in Australia has grown rapidly since the early 1990s, both in terms of capital under management and practitioners. This has contributed to the development of the informal venture capital market, as the two sectors provide complementary financial services. "It is now well recognised that private investors play a vital role in the formation and growth of unlisted companies, and that this contribution will continue to grow. Likewise, unlisted companies should continue to offer appropriate investors a growing range of investment alternatives." Victor Bivell, publisher of Australian Venture Capital Journal and Australian Venture Capital Guide.

Many people are asking, "Who are our entrepreneurial role models?"

In 1997 Access Economics released a report which stated that the most popular investment in Australia was thoroughbred race horses. The second most popular investment was wine, based on purchases of Penfold's Grange Hermitage.
In Victoria the fastest growing area of household spending in the three years to June '97 was gambling expenditure. Contrary to popular opinion this was financed not from diverting sales from restaurants and retailers but from general consumption expenditure. In contrast, investment in dynamic small business offers substantial benefits in terms of output/profit and employment growth. Equally, people are not saving, the pool of people without capital in later life will increase. They will virtually need self employment of some form to survive. A part time interest in a small firm could be the solution. Dr Peter Brain, National Institute of Economic and Industrial Research
" Small business expansion has been traditionally financed by bank lending. Banking relationships have been critical for small business, though this finance has always been inadequate for the dynamic firm. Now it is drying up. Banking policy has changed world-wide after the heavy losses of the 1980s. Access to overdraft facilities has tightened. Banks want to see detailed business plans, often want bricks and mortar security and the greater the perceived risk, the higher the interest rate and the margins. Dynamic firms need more capital. Ultimately they must accept an equity injection or compromise their growth potential. The problem is to match the equity needs of small business with the investment needs of private investors.". Dr John Marsden, Marsden Jacob Associates Consulting Economists
Commercial lenders, development banks and merchant banks will take up equity but only in well-established profitable businesses. The Australian trading banks, despite their media rhetoric, do not invest in new Australian ventures without substantial security, Colin Mason and Richard Harrison speak of the situation for small and medium businesses in the UK and USA where "classic" venture capital has been replaced by "merchant capital" - Classic venture capital is concerned with early stage investments and involves skills that add value in company forming, building and harvesting. Merchant capital funds, on the other hand, are almost entirely dependent on institutional investors, emphasise financial engineering know-how, transaction crafting and closing and fee generation, and are obsessed with short-term gains." ("Informal Venture Capital in the UK")
This situation has occurred in Australia over the years. Trevor Andrews, Marketing Manager of CIMA, a division of RMIT's Technisearch in the late 1980s, writes: “My experience leads me to the belief that Australians generally are not risk takers. There is a very strong conservative culture within those that have the financial ability to provide loans, take up equity, or fund commercial ventures based on new, unproven products. It begs the question of where would Bill Gates of Microsoft or Steve Jobs Apple, be today if they had been Australians!

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Please note: The manual makes reference to 1998 when it was written. Not a lot has changed since then and you will still find the information in this manual very relevant today.

If you are unable to purchase the manual, enquire about borrowing the CD version at your local library. Quote ISBN 0-9750083-0-7