Are there any ‘half Angels’ out there that want to just invest a little?

Hi Aunty B,

I am currently sourcing investors for my first hospitality ‘Boutique Bar’ venture and only need to raise $300,000 to open. As I have developed and designed the logo, bar, furniture, etc, t rather than paying another company to do this on my behalf, the costs have been greatly reduced.

As I have over 20 years in the industry I am very confident that this idea can work both locally and internationally and subsequently want to franchise the idea further down the track. As a result, I have protected the designs and trademarks with IP Australia, as when the venture is opened I believe it will break new ground with the theme and the way service will be delivered. At the end of the day my venture will see a 30% return on investment.

I have done a comprehensive business plan with budgets and rosters, etc which was 80 pages in length, (until my Accountant told me was way to detailed and to cut it right back).

I have asked family and friends to invest. Unfortunately, due to my timing amid the state of the economy, everyone can see the potential of the business and offer money to be involved, but it’s only about $100,000 so far. I really don’t want to start up with five different investors, all of about $50,000 each as it seems to be a messy way to go about opening my first business. Plus I don’t relish the idea of having to keep disclosing my secret ideas to secure the funds.

There are always stories of people wanting Angel Investors for millions of dollars, but I only need a relatively small amount in comparison.

So my question: is there ‘half Angels’? People who want to invest, but don’t have millions of dollars? I recently received advice and was told that investors are looking for bigger returns, ie. mining, solar, technology sectors, that return mega bucks.

Any suggestions? I am about to approach a bank.
Thanks,
Searching

Dear Searching,

It sounds exciting so good on you for giving it a go. And let’s hope it’s in Sydney. They need more good bars there, partly to cheer everyone up.

On your behalf, I have consulted with a few Angels and VCs, including our blogger Doron Ben-Muir. He points out that it is a very good idea to try and avoid a multitude of smaller investors. The complexity of establishing a new business increases exponentially with the number of stakeholders, as it becomes increasingly unlikely that all interests are well aligned. If this doesn’t pose problems early on…it has a habit of causing significant distractions over time.

As for your advice about angels, it is wrong. Most angels invest between $50,000 to $200,000. Many will invest even smaller sums but will always gravitate to businesses where they believe they can add significant value which effectively self fulfills the investment.

You say you have been in the industry for many years so you should have some successful contacts who you know and trust that might be able to add to your core skills base and share his vision.

The risk is that you expose your ideas to a potential competitor, so have an NDA signed (preferably with non-compete provisions) and target carefully – not for the money alone.

The best people to invest are successful people in your own industry or your supply chain.

It might seem a large sum but in investment terms it is not. The simplest way to go is to mortgage the family home, which means you have few (if any) investors to carry, providing you complete creative and business development freedom.

The problem with family and friends who may know and trust you is they may be ignorant of the market and the risks – a liability which can weigh heavily. In some cases it works beautifully but in others it can be disastrous.

So if I was you I would go with the bank – or hedge my bets – some from the bank and some from a successful entrepreneur in your industry who you trust to come in, stump up a bit of cash and be a partner.

Good luck!
Your Aunty B