Why? Well, the webinar maxed out with 100 attendees plus me….fantastic!

People were engaged – asked questions – were engaged….great!

I focused on some real and specific ‘things you can do tomorrow’ to go out and start making REAL traction with angel investors…amazing!

And we spent two hours going through some great content – an hour over schedule and most of the 100 people stayed active and tuned in…incredible!

So why was it a train wreck?

Because I, jackass that I am, in my complete nervousness with my first webinar FORGOT to press the Go-To-Webinar button to SHARE my screen….

Yep! 100 people stuck around for two hours…LISTENING ONLY to the webinar and I didn’t know how to read the comments from folks saying “Hey Andrew – can’t see the slides….” or “Slides please…”

Two hours of NO slides – just blank page….and people stayed on the line. The mind boggles!

Thank you if you were on the call…I apologize for my technological ineptitude!

During the call I outlined that we’ll be offering something we’ve NEVER done before….

But it will only be available to a handful of people.

Find out more here and listen to a replay of last nights webinar…

Replay

Thanks

Andrew

PS – listen to a replay of the Webinar Train Wreck

Related posts:

1. What Are Angel Investors Looking For? Six Key Motivations of Angel Investors (#4)
2. Finding Angel Investors is All About Social Media Now – What BS!
3. Small Business: Angel Investors in Danger?

Image via CrunchBase

Alright, I don’t rant often, in fact, I don’t rant period – its not my thing…

…and you can probably hear the ‘but’ about to arrive right?

So what’s got me hot under the collar?

The latest string of articles pounding the drum for Social Media and Social Networking – suggesting this phenomenon is the new secret sauce to raising angel investor funds. What utter and absolute BS!

Look – I love social marketing, its been a key way I’ve been able to get out and meet some really cool folks…but to try to say that social networking is the new panacea for entrepreneurs looking for startup capital is, well, its just pure crap! And more than that, it could be harmful if new entrepreneurs actually believe and act on it and think its the way to expedite funding their new businesses.

Why?

Because, and this is another reason why I’m getting a little frustrated, there is not ONE kind of angel investor and therefore there is not ONE general method for engaging and establishing a relationship with them if they don’t already pop over for Sunday lunch or for a bottle of Cabernet.

Just because we label them ‘Angel investor’ doesn’t mean they are all the same or are one type.

Their PRIME motivations differ just like any of us.

Now are there key considerations or ‘must haves’ when engaging with angels? Sure.

Does it need to be via twitter? Of course not.

Now this is where the social networking junkies will get all bent out of shape and claim that social networking is a more efficient way to network and connect with angels.

Again – underscoring my point – there are different kinds of angels (See a theme here?)

In my opinion – the angel investor community is going through an evolution – let me explain that…

Once upon a time angel investors were predominantly mature business people and the wealthy.

Angel investors are still mature business people and the wealthy but we’re seeing new-rich twenty and thirty somethings who have exited one software, internet or other meteoric rising company recently having being acquired by Google, Facebook et al – and when asked what they want to do now, being an ‘angel’ seems kinda cool as they watch Chris Dixon and others gaining cult followings. Sounds good at cocktail parties right and doesn’t require being in the same place every day.

Let’s all become angels – where can I get some new business cards made? Anyone?

What does this influx of new blood mean?

It means angel investing is getting shaken up.

It means that angels, what they want from investments, how they make decisions, and what startups can expect from angels is changing. Big time!

We’re seeing a new breed of super angel, and angel networks – both formal and informal.

But, and this is why I’m not climbing on the “Oh, isn’t Social Networking great for finding Angels” – is because I think, despite all the tectonic shifts occurring in angel investing, there are some threads which continue.

The best way to connect with an angel investor is to be referred by a trusted advisor, friend or contact. And having your investment begging tweet forwarded by one of your 5055 followers to an angel investor that is connected digitally just doesn’t cut it as a ‘trusted advisor or friend’. Sorry!

Another factor to consider is that angels want to ‘get it’ when they look at your business model. So, getting your concept out to everyone on the planet is just inefficient.

Angels will often invest in spaces /industries where they have experience or a strong interest – if you are looking for an angel remember this next point. Every hour you spend talking to investors is an hour taken away from your customers. And one could argue is therefore not where you should be spending 80% of your time and if you are not laser focused on what kind of angel you need, want and is most likely to say ‘yes’ then you are wasting precious time.  Yes angels are smart people (often but lets not forget that having cash does nothing to increase your IQ whatever an angel may tell themselves when they look in the mirror in the morning) but you should try to get the investment process resolved efficiently so you can focus on…your business (remember that?)

Finding the perfect angel is not a throw it at the wall and see what sticks process.

So – love twitter but:

1)  Understanding your angel needs beyond the cash (What I call your “Angel DNA Match”)

2) Finding the people who will refer you to the right angels (People respected and with some gravitas is always good)

3) Making sure you have the key proof points stacked right (Ask me if you want more info on this concept)

4) Being ready for the first, second, third meetings… (Your Angel tools to move them around the Angel Wheel of Yes…)

Should be your areas of focus when looking for investors.

And one last point – despite the changes, many angels invest in companies within 100 miles of where they’re based. Probably has something to do with the fact that investors are often ‘risk mitigators’ rather than ‘risk takers’. People (and angels are people too BTW) are prone to say ‘No’ when the risk seems to balance the benefit. The reality is that the benefit needs to be a multiple of the risk and you need to stack the proof as a way of giving as close to a guarantee as you can.

Here’s a weird recommendation – Learning the psychology of  creating offers in copywriting wouldn’t be bad idea for this part of the process. If that sounds strangely logical – here’s a course that might be worth taking a look at  - 3 Hour Copy

And how do Angels mitigate risk?

By meeting the company they considering investing in and seeing the white of their eyes and smelling their fear

So, arguably, any investor connections you make with twitter, facebook, whatever – beyond that 100 mile radius is just wasted effort.

Using that as a filter – this is where I would invest my time if looking for an angel investor:

My own network – friends, friends of friends, my social groups (Church, Sports, Wine Group etc), Alumni groups (School, College, military service)

Can you use twitter, facebook, linked-in etc as tools to mine your own extended local network – Abso-freaking-lutely!

But use these tools precisely - don’t – please – think that getting your message out to the whole world is going to get your an angel investor. It won’t. Leveraging your own network, finding the trusted advisor who will be your champion, will.

Let me know if I can help you go through this process and leave a comment or email me if you agree or not…

Andrew

++

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Related posts:

1. What are Angel Investors Looking For? The Six Key Motivations of Angel Investors (#2)
2. What Are Angel Investors Looking For? Six Key Motivations of Angel Investors (#4)
3. 5 Simple Strategies for Finding Your Own Angel Investor

I’m sure there are potentially hundreds of reasons why you haven’t closed your angel investors yet.

Now this is a blog and there is no way I can know who is going to come read this article right?

So – there are no cards up my sleeves, we didn’t meet each other previously and there are no obvious tricks here right?

Right…Good…glad we cleared that up….

So today, I’d like to try an experiment….

I’m going to propose three reasons why you have not closed your angel investors yet…

And here’s the deal – and this is where it starts to get really interesting…one of them is ABSOLUTLEY not the reason why you have NOT closed an angel investor yet…

…but I’m not going to tell you which one it is…you’ll have to figure it out.

That should make this experiment really easy right?

If one of the reasons is a fake then that only leaves two reasons why you haven’t closed your Angel Investors yet…

…(and just to give myself somewhat of an ‘out’ – elements of each reason may be accurate,other elements perhaps not so…well, hey, I’m the author, I can stack the deck any way I want!)

…and if there are only two big reasons why – if you know what those reasons are…then you are that much closer to addressing the reason right?

…right…

Here are the Reasons – now…don’t forget ONE is absolutely not the reason and one of the other two is!

YOU have to determine which is which and by all means add your thoughts to the comments or send me an email with your thoughts…

Three Reasons Why You Haven’t Closed Your Angel Investor Yet:

Reason 1

The reason you haven’t closed your angel investors yet is not your fault.  Basically the economy stinks and the amount of cash out there to invest in new businesses has dried up. You, your business, your business plan, executive summary, elevator pitch, your sector, your positioning and your vision for what your business can be and your understanding of how to get there are all PERFECT!

It is absolutely not your fault – it’s the market and it’s because you haven’t met the right angel investor yet. As soon as you meet the RIGHT angel investor (even though the economy stinks!) you’ll close that right angel and be on your way to business success and fulfilling your dreams to create a world changing, heavily lucrative, personally rewarding company.

Right – that was Reason #1 by all means read it again to determine if that is one of the real reasons or the fake one. Remember – one reason will be fake, the other two possibly your reason /s.

Reason #2

The reason you haven’t closed your angel investors yet is absolutely and categorically your fault!

You’re just plain not ready to have someone drop $500K…$250K or even $2.50 or a semi-eaten bagel on your business, for that matter.  You have the beginnings of a great idea – an idea which COULD become a great business – but you haven’t really jumped in and really owned making this happen, making sure you absolutely understand your market, your opportunity, the competition, and how you will deliver on the potential that your business has – you haven’t completely NAILED your business plan, your executive summary, your pitch deck, elevator pitch, your financials, you haven’t figured out how to creatively trial / test your business idea and you haven’t achieved many of the key milestones investors will evaluate you on as they go through the dating process. You have sort of determined your weaknesses – but you haven’t addressed them or completely determine a specific and tactical plan of action which will address them, like, yesterday.

Now – I could keep going but you get the gist…

So is this the real reason why you haven’t closed your angel investors yet (or is it the fake reason?!)

Reason #3:

The reason you haven’t closed your angel investors yet is absolutely and categorically your fault!

This reason is more around the ‘How to’.  Believe it or not, you can’t just throw out a few emails, make some calls, meet a few folks for coffees, have a couple of meetings, throw a Kinko’s bound business plan across the table and expect that after a few follow up conversations you’ll be watching the ink dry on a new check made out to CASH! It ain’t gonna happen – and if you think it will or thought it will then

“Don’t Quit Your Day Job!”

So picture this….

You go to a car lot – you talk with the car salesman – and he tells you how great the car is but here’s the weird thing….he doesn’t actually show you the car. He just asks you to imagine it, tells you how nice the speakers sound (without letting you listen of course..), he tells you how soft the naugahyde leather seats feel, he tells you how powerful the engine is and how fast it can accelerate from zero to 60 in first gear…

…but, he doesn’t actually show you the car. Not even to toot the horn!

All the while you’re looking around a vacant car lot…

No cars – not evens a hint of a car…

So let me ask you a question….

How big a check would you write that salesperson for that car?

Yeah – me too!

So again – what makes you think that with some fancy footwork (assuming you even HAVE a great business plan, executive summary, financials, pitch deck, elevator pitch, …yadda  yadda yadda…)

…that the investor will quickly see how great your business is and give you the cash you need?

Believe it or not – you have to know HOW to go through the investor funding process or at the very least, understand many of the dynamics, triggers and motivations involved.

++

Right folks…so which is the fake reason and which of the other two hit the nail on the head for you to some degree?

…and if today’s magic trick doesn’t hit the spot…

I challenge you to tell me why not…

…and if you’d like my help addressing any of the above – let me know through the contact page above.

Andrew

PS – Do you think I wrote this just because I was having a boring lunch? NO! I wrote it to help you. If you would like more help – join my mailing list (right column sign up) and my RSS feed (little orange icon…can’t miss it!)

PPS – take this survey and tell me what you need…and how you can start…really start growing, that great company of yours….

http://www.surveymonkey.com/s/SVMFLJT

Andrew

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Is raising funds for your new or growing business tougher than you thought it would be? Are you wondering what it will take to get an Angel to say “Yes!”

Well in this article I’m going to give you two things – one is a powerful angel investor suggestion which will help you (even though I don’t know about your specific business…magic huh?) and then I’m going to offer you something for free that could help you. How do I know? Because I’ve tried to spin my way to funding and I learned from the experience, so knowing this suggestion will help make sure you don’t fall into this trap.

Before we get into it – I’d like to stress one point – if you read this all the way to the end and then take action, you will be much better off than you were just ten minutes ago…but if you don’t then you will be no better off and perhaps you’ll end this day not making the progress you want to achieve and without positive action, why will tomorrow be any different too?

So read this very brief article, take a specific action and you’ll be make a move closer to getting the funding you need for your business – and we both know that more funding for your business will mean more growth, more success and a future that today you can only envision. Sorry to get all ‘Tony Robbins’ on you but I woke up today wanting to make more of a difference to you and your business and the best way I know how is to make sure you take action – and I want to help you do it…

So first the suggestion…and then I’ll get to the free offer…

Here’s Secret #1 – Angel Investors have SUPER powers…

Now they can’t leap tall buildings or see through clothing but the majority of them have a common super power which, when you know about it, will help you find and close your angel investor FASTER than you thought possible.

So what is that super power?

Angel Investors have invisible psychic tentacles which wave around their bodies.

You don’t believe me do you?

Well its true.  And these invisible psychic tentacles capture and filter every communication you make – from the words to the body language, to the presentations, phone calls and emails and do you know what they are filter for?

In short – bullshit, fudging, spin, exaggeration, guesses, gloss and hyperbole…

Now you don’t realize it yet (but you will after a few months of banging your head against a wall while you DON’T get funding…) but I have given you one of the golden keys to the Angel Funding Kingdom – and collecting and using these keys means you can pretty much raise what you want, when you want and take any business idea and make it real.

Again – Angels really do have these psychic tentacles and if they touch bullshit, spin, exaggeration and the rest then any trust you’ve created will likely disappear.

So what do you do about it? How do you neutralize these psychic tentacles?

The answer is “You don’t!”

If you learn how to raise angel funding and get your angels and your funding then you will WANT there to be absolute and complete honesty and disclosure BEFORE you sign any of the contracts and get that cash. Believe me – if you are ‘spinning’ your way into the cash and then they find out you’ve been secretly exaggerating your way into funding then your life will be a living hell.

So does that mean that you tell them absolutely everything, warts and all, from day one?

Day 1 should focus on the big idea…the story behind your business…the why you matter and how you will change the world. The first meeting is NOT for airing all your weaknesses.

But the reality is – angels expect weaknesses – they’re WHY you need they money? They know that.

Don’t try to hide it from them- your goal is NOT to look perfect…

Your goal is not to look like a $1m business when you are worth $50K – your goal is to create an open and honest working relationship with angel investors who can give you the money you need.

In fact, if you bring out your weaknesses – point to then – and start talking them through how you are thinking of addressing them – you will get a few amazing results – it could even get you the funding you need.

If you and they start to brainstorm what your business needs to be successful – this is magical – because the Angel is imagining how to make your business better….and here’s the really powerful element…by giving you their ideas, they are mentally investing their will and desire to making your business successful – you are making them WANT to see you business succeed because you are following their advice – when you succeed, they succeed. And this is about ego and self image – not just about making a financial return.

So get them focusing with you on what it will take to address your companies weaknesses and you HAVE them…

And here’s the alternative – if you show them your weaknesses and they couldn’t care less and don’t have any suggestions, ideas or contacts for you -THEN YOU DON’T WANT THEM AS AN ANGEL INVESTOR. Kick them to touch, go focus on angels delivering real value above and beyond the money.

I mentioned at the beginning of this article that I would share some critical information with you and give you a free offer. What you have just read really does have the power to save you months of running around trying to lock in funding and get you not only the cash your business needs to be successful but identify the RIGHT angels who will work with you, as partners, to make your business something to be proud of.

And the free offer is the action you need to take right now to progress the funding you need.

I have just had some slot come available and will offer the first ten people who respond 20 minutes of free consultation about your funding over the next two weeks. If you would like a free 20 minute consultation about your startup there are some rules.

1) If you schedule a call and need to cancel you need to give me at least 24 hours notice. If you don’t cancel 24 hours or more before then I will not work with you in the future.

2) You need to come to that 20 minute call with the ability to communicate what your business or concept is and with 5 questions already thought through and prepared. Ideally you will email them to me 24 hours before our call. The why of this is so I can really give you value when we talk.

So if you would like a free 20 minute consultation about your funding – contact me through the ‘Contact’ page right now.

Make progress on your funding now and contact me for a free 20 minute consultation.

If you are one of the lucky first ten people then we’ll be talking soon.

Best of luck in your business.

Andrew

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1. How do I find an Angel Investor?
2. How to Close an Angel Investor
3. Three Reasons Why You Haven’t Closed Your Angel Investor Yet

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I had a conversation today with a member of Eben Pagan’s team …

…for those entrepreneurs out there who don’t know Eben Pegan – he has helped entrepreneurs with various courses such as ‘Ignition’, ‘Guru Mastermind’ and others. Certainly worth checking out

….and look Ma, no affiliate links to Eban! I’m just glad to point you towards him – he can help…

So, for whatever reason, the conversation got me thinking about the very first time I went through the angel investor process and how, after quite a few months, I managed to close my first group of angels…

When I set out to raise money I was passionate about my business…you have to have that burning passion because it sees you through the lonely nights when no one loves your business or you…its the fuel that keeps you going even though you are inwardly cackling to yourself with insane laughter, giggling to yourself like a sleep deprived child (probably because you are very likely to be sleep deprived through self imposed highs, lows and Titanic sized pressure….)

…but here’s the strange thing….

…even though I was passionate about my business…even though I could see the world where my business would exist and where it would dominate the four corners (?) of the globe…a small part of me wondered if I would ever get the money we needed. Could I really get someone else to see the same world as me?

Who did I think I was? J. R. R. Tolkien?

The other interesting part of the equation that caused an extra few months of delay in closing my angels was the master / slave dynamic that I felt between me and the investor’s position and our negotiation…no, nothing kinky intended!

And do you know what too little sleep, too much Starbucks coffee (can anyone say free temporary office…), combined with never having been through the process before and feeling like the weakling in the relationship equated too?

…months of jumping through hoops…answer another set of increasingly obscure and inane questions for some who shall remain nameless…and having the process drawn out past the achievement of some key milestones which almost mitigated the need for the investment in the first place.

So here’s the conclusion I came too today after talking to one of Eben’s folks – here’s the two part answer that would have saved me months in the fund raising process and would have got my company growing much faster, much sooner….

Here’s the two part answer to “How to Close an Angel Investor” that would have saved me months:

How to Close an Angel Investor in two Simples Steps:

1) Find someone who had been through this process repeatedly and have them guide me

2) Ask for the Investment (or more accurately, know when you’ve answered enough questions and when its time for the angel to put up or shut up…and yes, I do mean that!)

Again…

Find someone that can help you through the process and LISTEN to them….

and ASK for the decision.

POINT BLANK.

No ifs, buts or maybe’s….what do they want ‘guarantees?

…and if the answer to that is ‘Yes – they’re asking for guarantees’ – tell those investors ‘types’ to go to Hell!

Case closed!

“But how will I know when to ask?”

Hold it a sec…perhaps you are asking yourself… “When will I know when its the right time to ask for the deal?”

This is how I predict the conversation is likely to happen…

…they’ll ask interested questions during your first presentation…they’ll sit forward, be engaged and will probably spend some time reviewing your documents before a second presentation.  All good right….

Then you’ll have your second meeting – they’ll come up with better questions and you’ll need to dance your way through them – assuming they’re still smiling, they will probably suggest a day or two to think before they talk or meet with you again…still good…

During the next chat or meeting – they will tell you they need more data or they need to see some progress in a particular area – perhaps achieiving an additional milestone.  The distinction between these two requests is HUGE!

Let me let you into a secret – if they are asking for more data then they’re still interested.  At this point, ask them – “Is this a full list of all the data you’ll need to make a decision?”

…and don’t panic – pushing for the close in a gentle way is a good thing. You’ll need to demonstrate that ability to move a deal forward otherwise you’ll not be able to get customers.  They’ll respect you for it as long as you don’t beat them over the head with your pushiness…

So, having asked that question…they’ll smile and if they assure you it is all they’ll need – go get that data…

If they ask you to make more progress, this means the investor has either decided to ‘pass’ i.e. not invest, or they want to further reduce their risk. This puts them in the ‘follow up later’ category. They are unlikely to invest so decide how many more cycles to spend before you focus your efforts elsewhere.  I would go find someone else in your shoes but that’s your call.  They will probably not become investors.

But before you walk out with your tail between your legs – here’s a piece of advice that could be worth the $500K you go ahead and raise…

Angels tend to invest in groups. Most entrepreneurs raise money by bringing a few angels together.  What does this mean to you?

It means the angel you are talking too probably knows other angels.

So – after this angel has either told you ‘No’ or “maybe later” – ask them for a referral.

A simple “Out of interest – are there other friends of yours that might be a good potential mentor or angel for us? We would really appreciate you helping connect us….”

Again – its all about not being afraid to ask…they will respect you for it. Promise!

…And here’s an example of asking…

I want to build a relationship with you…

Sign up to my list – get the free Venture Capital checklit on the right and join my RSS feed. AND add a comment.

See – wasn’t so hard…

Let me know if I can help you as you go through this process.  Assuming I have the bandwidth – I’d welcome the opportunity.

Best of luck

Andrew

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Angel Investors…Even the words make them sound like saviors who can swoop down and save you and your company from obscurity – beings who can lift you up by their wings and financial resources and make your business dreams come true.

But do you need to get down on your knees with palms pressed together to get yours?

In truth – luck (and prayer) might be a critical element – but being prepared and knowing what you’re doing are (like always) the most critical elements.

So, getting into it…where can you find your angel investor?

Here are…in no particular order…

5 Simple Strategies for Finding Your Own Angel Investors:

Simple Strategy 5 - Uncle Bob And Aunt Martha:

Believe it or not, crazy uncle Bob or Aunt Martha could be your angel in disguise – just because they’ve known you since you were a drooling on yourself, and just because they insisted on giving you socks for your birthday and remind you of breaking their window with your baseball at every family get-together, that does not mean that they have not got access to funds should they decide that you and your business are a worthwhile investment. Family and friends are surprisingly a popular means of raising angel funding.  

Angel Investor Tip #1: Despite the blood bond, take your ‘pitch’ to them seriously – invest in the same amount of time and work to prepare for the ‘meeting’ as if you were meeting an Angel from the best Angel network. Take them through your business plan in a professional manner, take their questions seriously and if they decide to move forward, formalize the agreement contractually. And send them monthly written updates just like you would any angel investor.

Simple Strategy 4 - Your Local Community:

Most angel investors invest within a reasonable driving distance of where they live.  Angels often invest because they like to be involved in the businesses – either because its in an industry they now well because of their own experience or because they believe they can add some value to the business above and beyond the funding.  This tendency means that most angels are likely to come from your community and are also likely to be successful people in your industry or one related to it.  

Angel Investor Strategy # 2 is to join your local business Chamber of Commerce – they often have events – networking is going to become your middle name as you look for an angel investor.  

Angel Investor Tip #3: Don’t go obviously looking for an angel investor – it will turn people off – instead go to the social events looking for a mentor – in fact, if you get on well with the folks at the events, ask proactively for any people are are ‘good mentors’ for local business people – this will lead you more quickly to an angel and a mentor than just going out looking for cold, hard cash.

Simple Strategy 3 -  Social Media and your Social Network

Your personal network is going to be a critical resource when looking for an angel investor. Sign up to linked in and Facebook and begin connecting your heart out with as many of your friends, old work colleagues, people from your affiliations (sports clubs, church, old schools, colleges and more).  Talk enthusiastically and passionately about your new or your growing business – passion and enthusiasm is contagious and people want to be a part of something with momentum and excitement -

Angel Investor Tip #4: Just like Uncle Bob mentioned above – don’t fall into the trap of thinking Angels all have grey hair and have passed the finishing line of their career – many angels in today’s business world are still using Proactiv having retired from a Google’sque type company at the grand old age of thirty. That guy you used to call ‘Nerd’ at High School could be the Angel you’ve been looking for…you better hope you were reasonably pleasant or it could be ‘payback time!’

[Talking of payback - take my 30 second survey and tell me what help you need...]

http://www.surveymonkey.com/s/SVMFLJT 

Simple Strategy 2 - Other Entrepreneurs:

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Here’s a quick poll….

Now I was going to set up a nice and easy to use poll and create links etc on this post…

But you know what, if you can’t add your choice as a comment or send me an email via the ‘Contact’ page, then you probably don’t care enough…

…and those people that don’t care enough…

I don’t really want their opinion…

…would you?

So here’s the poll…

Would you rather see articles on:
1) How to get angel investor funding?
2) How to get venture capital funding
3) How to find angel investors?
4) How to close an investor deal?
5) What are thetypical steps to engaging and closing an investor for your business?
6) Other (Please throw out a few suggestions and we may add them to the poll list)
7) So what is frustrating, bothering or worrying you about starting a business, growing a business or getting funding?

Just trying to get ‘into’ those areas that are really important to YOU!

YES, YOU! Not Me but You…so, over to YOU now…

Anything…go CRAZY!

Comment or send an email… (andrew (at) thefundingguru dot com)

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If you are looking for small business capital then it’s possible that the odds of you being successful have just been significantly harmed!

For some time, SEC regulations have outlined what is an ‘Accredited Investor.’ As an entrepreneur, your ability to raise money from Angel Investors is constrained to those people who overcome the hurdle of being an ‘Accredited Investor…

For some time, accredited investors, as it relates to Angel Investors were:

• a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
• a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year

(Rule 501 of Regulation D – SEC regs)

So what does it mean to you if you’re an entrepreneur or if you’re about to start a business?

A few things…

…this is a body or organization somewhere which is deciding who are allowed or are not allowed to invest in your business…

You might have thought that anyone can invest in your business…perhaps your best friend, your aunt, the local Priest, but the reality is that there are long standing regulations which dictate who you are allowed to sell shares in your business too…

And here’s another kicker…it looks like the hurdles which determine who are or are not allowed to invest in small business have been increased.  Now it’s true that an amendment has been approved, but even so…

…here is one change to the regulations for example which could severely reduce the number of accredited investors…

Remember this provision from above…

“A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;”

…previously that $1m of assets could include a person’s house…now, it cannot!

This one change alone means that the number of angel investors out there who are legal able to invest in young businesses has just been reduced…now the argument is that the regulations are being put in to protect the unwary or the downright stupid (I’m paraphrasing…) but who ever decided that having a certain number in a bank account was a good indicator of smarts or investor insight?

With the advent and growth of the structure of legal corporation’s decades and decades ago – where the liability of the investor is limited to the initial investment made – I wonder why we need the accredited investor regulations to be tightened and come to that…

Why we need them at all?

Andrew

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