Become a business angel in 12 steps

The 12 bids from Business Angel are taken from Olivier Ezratty’s guide to high-tech start-ups and are precautions to be taken by anyone wishing to invest in a start-up in this property. Applicable to investors as well as startup executives, these few points can help both sides during their transactions, especially if you want to buy a business. But what do you need to see when you want to become one?

Invest in projects you understand

We will not say it enough, if you do not know anything about IT, it may be wise not to invest in this area, otherwise you will not always understand the issues that lie in this sector. It remains necessary at least to understand what the company is doing. It is useless to want to invest if you do not understand absolutely anything because you will not be able to ask entrepreneurs the right questions, or advise and even better ensure that the company really has prospects for the future. Even if you are not an expert in the field, you are interested in the added value of the offer in relation to the existing one and the barriers to entry.

2. Do not blindly believe in the business plan

It is admittedly a valuable tool and a good indicator of the quality of a strategy, but no more. Tell yourself that this would be known if business plans were the gospel. Moreover, making a business plan is not predicting the future, but making a forecast that can vary depending on many factors (economic situation, sudden market development, etc.). Ideally, you should be interested in the variables that are taken into account and check that none of them have been biased or even worse forgotten. Check both buying and selling. If any posts are missing, do not hesitate to apply.

Moderates your enthusiasm and prefers to be convinced instead of being seduced

Who has not yet been impressed by the presence, the choice of words, the gestures, the eloquence of such a young entrepreneur? If these are essential qualities in politics, they are less in entrepreneurship, though they can be used. A good strategy is not necessarily a good strategy. To avoid falling into the trap, take a step back and consult with external opinions. If you are convinced of the key success factors, business model or competitive advantages, you will have a better chance of having found a viable project.

4. Prioritize the team over the project

A startup is above all the people behind. Without them, no business, no creation. It is therefore necessary to place greater emphasis on the project managers than on the project itself. Two ideas would emerge in two places in the world at the same time, but would not experience the same success. Interest in the team is not insignificant, especially if the company encounters difficulties because it will be the team that has to keep the ship. Similarly, it is not a luxury to verify that they have the competencies needed for business development.

5. Assess the creators’ ability to question themselves

A startup is like life, it never goes as planned. How do entrepreneurs react to the unexpected? Do they ask themselves? So many parameters that will give you an overview of what to do. It is not uncommon for a company to change its business model. The founders must therefore have the ability to question themselves. Although they should not listen to all the advice (some of which is bad advice), they should still keep an open mind and be receptive to different signals.

Do not spend 6 months negotiating the shareholder agreement

Turn on the iron when it’s hot! There are issues that need to be addressed as a priority and the shareholders’ agreement is one of them. No need to waste time and money because it is better to establish clear basis and thus avoid unfortunate misunderstandings. The shareholder agreement remains a basic legal document, and as long as everyone is protected and can not be harmed, one can move forward quickly.

7. Investment and management must not be confused

I finance therefore I lead? Certainly not ! Avoiding managing the companies you invest in is a basic precaution that avoids sinking your investment yourself. Keep in mind that entrepreneurs need money, advice, but not necessarily your leadership. On the other hand, the more you interfere in management, the more likely your protection is likely to jump. Since the boundary is thin, be careful not to cross it, as you could quickly get into a de facto management situation.

8. Words given, words sacred

If you are not planning to invest in a business, you do not have to beat yourself up. On the other hand, if you decide to invest your money there, keep your commitments. A Business Angel that does not live up to its obligations to startupers is not a Business Angel, but a Business Devil … You’re wasting time on this entrepreneur who can use it elsewhere so you might as well not have such an attitude.

9. Dilute your risk by diversifying

Leads to govern better, but above all to govern better. By diversifying your investment, you dilute the risk … a story of eggs and baskets. In anticipation of a possible bad patch, it is recommended to diversify quickly because all the projects you want to invest in do not risk being successful. If some will surprise you in a positive way, others will encounter unexpected difficulties so you might as well prepare for them.

10. Accept bowls like any entrepreneur

Investment is not always synonymous with a success story. And yet it takes a long way to get there. A path strewn with stones and by a fall one must accept the mistake step and learn from it. The minimum is to be aware that there is no zero risk. In general, half of your investments will go to losses, a quarter will simply stagnate, and the other quarter will experience success.

11. Not to invest your last savings

We know that playing Business Angels is not for everyone. If you’re having a hard time at the end of the month repeating your cash runs or your electricity bill, do not! To be a Business Angel, you need the funds. And with good reason…

12. Money bet, money lost

Not all startups are destined to become international corporations with 10-digit revenue. Unfortunately, some do not even go beyond the TPE stage. Whoever invests his money in a startup must be ready to lose them if one does not want to be constantly in anguish and put pressure on entrepreneurs.

These are the 12 key points that depend on an investor who wants to become a Business Angel. In the case of a mirror effect, this applies to the entrepreneur who has to choose his / her Business Angel (s). But be careful! Business Angels are not (all) angels: there is bad practice and we recommend that you read “Business Devils: Bad Practices That Can Be Encountered” by Guilhem Bertholet.

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