If you are an entrepreneur based in San Francisco and the Bay Area with a small business or start up, that lacks the initial seed capital and business funding to take your business to the next level, what can you do?
Fundraising for a new business can be difficult. Traditional banks, financial institutions and venture capital firms can be reluctant to lend a brand-new business any money since they often require a solid trading history before they will provide support. Brand new businesses and start-ups especially in expensive locations such as San Francisco, tend not to have the financial security that these types of investors require. This means that entrepreneurs often must look towards alternative sources of investment, such as angel investing.
It is quite common for an angel investor to invest in a business at the early stage. Often angel investors are interested in entrepreneurship and look for projects and investments that can provide them with a good return on their investment in the future.
New businesses and start-ups can be a risky prospect for an investor to fund since many brand-new businesses fail within the first year. However, angel investors can mitigate this risk by working with projects in a market that they have experience with.
In return for an angel investor's financial contribution, they will normally receive a certain amount of equity of the business that they invest in. So, the potential rewards from their investment can be large, and this helps mitigate the risks.
Not all the projects that angel investors fund are successful, but those that tend to be very profitable investments. Of course, both investor and entrepreneur should carry out their due diligence to completely understand exactly what it is they are getting involved in together.
Every business requires a solid business plan, and the entrepreneur or business owner needs to have a firm grip on the financial aspects of the business. They will need to understand how their revenue streams work and what expenses and business expenditures they will incur.
Often new business owners overlook the outgoing aspect of their new business. Ultimately, cash-flow is one of the main reasons for a business to fail, not necessarily because there is a lack of market, especially in buoyant locations such as San Francisco and California. A professionally written business plan will help show any potential angel investor that you have done your research and that the business in question has an opportunity for success.
It may also help your chances to attract an investor if your business is based in one of the major sectors and industries that San Francisco is popular for. Being located on the doorstep of Silicon Valley means that tech, life sciences, healthcare, financial services, and real estate are all popular industries. Even if you are not looking to launch the next semiconductor company, angel investors may still be attracted to your business idea, since San Francisco and the wider area are hot beds for start-ups and entrepreneurship.
Outside of San Francisco, Palo Alto and Silicon Valley, are key areas in Northern California. The Bay Area in general, and other locations such as Los Altos, Santa Clara are also popular areas to start a business.
If you are looking to start a business that targets overseas or other countries around the globe, it is worth noting that angel investors can be based in any country. You may be able to find an investor close to home in San Francisco, but often angel investors are based abroad and are attracted to businesses and investments in certain locations.
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