Angel Investment: Giving Your Business Wings
Posted on August 10, 2014
in Publications, Legal Insights
In plain terms, an Angel is someone who invests in a business, usually in return for at least part of its ownership. In many cases, this person also adds a special touch to the venture through sharing whatever particular expertise or relevant experience he may possess. Angels invest for a variety of reasons ranging anywhere from a genuine belief in the potential of the business to a personal connection with the founder. Whatever the rationale, Angels are often a key source of early investment and being the object of an Angel’s interest can translate into financial blessings.
It is for this reason that the Barbados Entrepreneurship Foundation recently established Trident Angels – this island’s first angel investor network. In doing so, this non-profit organisation created an accessible pool of investors as a key element in Barbados’ emerging entrepreneurial ecosystem. This is, without a doubt, an excellent resource for the local entrepreneurial community and will provide a much needed alternate source of financing as opposed to, for example, loans from commercial banks or other lending institutions.
However, it should go without saying that there is no such thing as free money. Angels accept the risks of investment with the hope of some reward. They have money at stake so they naturally come with their own expectations and personalities – both of which need to be carefully navigated by the discerning entrepreneur.
Although typically very aware of the failure rates of new businesses, an Angel’s main objective is to reduce that risk in not only the business’ best interest, but also their own. How exactly they go about that can vary widely from Angel to Angel, as does each entrepreneur’s receptiveness to any particular method. Therefore, parties to any proposed angel investment should consider carefully the dynamics of the arrangement and ensure that the value proposition to both parties is sufficiently clear and the inherent risk well understood. Specifically, they should both fully appreciate that as with all relationships, some unions will be a match made in heaven, while others simply will not work.
The entrepreneurs who will benefit the most from this financing option will be those who remain open to the significant guidance a good Angel can offer without ceding complete control over his business or his vision. Very practical ways to do this include conducting a thorough background check on any potential Angel and seeking independent legal counsel BEFORE you sign on the dotted line.
Finally, it is important to remember that Angels ‘buy’ equity in your venture, not your soul so you need to know where to draw the line. If there was only one more piece of advice I could give with respect to Angels, it would be to trust your instincts. If it does not feel right, do not do it! You can thank me later.
Sade N. Jemmott (email@example.com) is an Attorney specializing in Corporate Commercial Law with a focus on International Business and Entrepreneurial Business Ventures at one of the region’s leading law firms – Lex Caribbean. She sits on the Board of Directors of the Barbados Entrepreneurship Foundation where she co-champions its Mentorship and Networking Pillar and is also an entrepreneur in her own right.
Article was originally published in Issue 3 of Dazzle Magazine (print & electronic) http://dazzlebarbados.com/dazzle-magazine-issue-3/
Chambers and Partners has once again named Lex Caribbean as a Band 1 Leading Law Firm for General Business Law in Barbados, […]
by Mary J. Mahabir, Q.C, and Joanna M. Austin In recent years global demands for corporate transparency have increased. In 2014 […]