A reader asks:
I’m looking for funding for my new business idea. I’ve been told that I should look for a business angel, but will a business angel invest in an idea?
Far too often venture capitalists and business angels are talked about as though they all work to a standard process; “venture capitalists will not invest in start-ups” or “business angels will mentor the entrepreneur”. In reality they aren’t all the same, yes venture capitalists probably differ less as they tend be investing other peoples money and as such will need to be able to demonstrate to their investors that they are being responsible. In addition venture capital funds may be structured as tax efficient vehicles (i.e. Enterprise Investment Schemes) which may limit the types of investment they can make. Business angels on the other hand are investing their own money and only have to answer to themselves, they therefore have more freedom to do as they please.
To answer the question, “will angel investors invest in an idea?” If the business idea is good enough then yes I expect that some business angels will invest purely on the basis of an idea, however you are far more likely to get investment in your start-up if you’ve actually started to turn the idea into reality. You’ve got an even better chance of getting funding if you’ve started selling your product/service and can show that it is in demand. Quite simply the further your business is developed, the less risky it appears to be so it’s more likely you’ll get investment, additionally the less risky it appears the less equity you’ll have to give away.
Asking John:
Do you have a business question you would like me to answer? If so you can Ask John or you can ask on the forums where you’ll get both my input and that of your fellow entrepreneurs.
This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
I read on Barry Moltz’ website (author of Bounce, a book more focussing on failures in business) that your idea doesn’t necessarily matter that much, it is the execution capabilities of the person asking for the money that counts.
Tom,
Absolutely and I’ve said the same thing many times on this blog. It’s the ability to execute an idea that matters more than the idea.
[...] John Crickett presents Will Angel Investors Invest In An Idea? posted at Business Opportunities And Ideas. Ever wondered if a business angel would invest in your idea before it’s been implemented? [...]
Yes, ideas are meaningless. Its the execution that counts.Many people can have an idea, few can make it work profitably.