Getting access to the right seed and growth finance is critical to the success of most emerging technology companies. But finding the right investor can be a daunting task for any founding team.
You have to deal with different mandates, big egos, various terms and long lock-in periods just to start discussions and there are many boxes to tick.
Without significant direction, founders can spend months worth of crucial time and energy in pursuit of an investor instead of focusing on growing the company and its value.
Founders need to know where in the investment cycle they fit, what types of mandates are applicable to them and where to find those investors. A working knowledge of the various types of investors available is critical. Let’s unpack the most significant ones:
From Venture Burn. Story by Louw Barnardt.
Angel investors are high net-worth individuals that fund entrepreneurs at a quite early stage. They will normally invest on their own or in a group.
Angels are usually successful entrepreneurs who have built and sold their own companies over many years. They understand what it takes to build a business from the ground up, having done so themselves. They can also spot others who will likely be successful at doing the same.
They have usually built their companies or spent their corporate careers in a certain industry for which they build an indepth understanding of. It’s often in this industry or a complementary industry that angels would look to invest.
As the term “angel investor” suggests, traditionally terms set by angels are very generous, like a shareholder loan with long repayment terms or low interest for a small piece of the pie.
In South Africa, because the angel community is still small and access to early-stage finance is limited, in many cases angel terms range from relatively generous to extremely onerous. Angel ticket sizes will generally range from as little as R100,000 to about R4-million, with almost all such investments originating from personal relationships.
Read more at Venture Burn.
