Equity or Angel Funding is an amount of money offered in exchange for a share of your business. You will need a Limited Company to issue shares and a Shareholder Agreement to set expectations about how you will both go forward.
The investment is not secured against any assets other than the business itself. By investing in your business an Angel Investor is helping you to succeed but they are also gambling on your ability to generate rapid growth so they can exit from your business again and make a good return on their investment.
Depending on their assessment of the risk, an investor will expect a corresponding share of your business. The value of the business becomes higher as you start to get a track record and prove the concept and the business model. At the beginning all you may have is an idea and if you haven’t got any business processes, prototypes or customers, you need to recognise what a gamble they are taking. To raise money so early when your valuation is low means giving away a higher share of the business and could make it an expensive way to raise money. It could be better to raise a smaller sum and prove the concept, then come back and raise the rest of the money you need when the company's valution is higher.
Your Regional Manager can discuss this with you at one of our free Business Funding Clinics.
If you're not sure about whether you are ready for investment or whether equity funding is right for your business, do come and talk to a Regional Manager in your area to discuss the best way to proceed.
Please get in touch if you have any questions or would like to discuss this further.
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