Finally starting your business

Every day we read about new and exciting new businesses in the press or online. Just yesterday there was a story about Amazon buying LoveFilm. LoveFilm, Europe’s leading movie subscription service, for an undisclosed sum, but a figure of around £200 million. Amazon already owned 42 percent of Lovefilm. The LoveFilm service and website will remain live, but no other details of Amazon’s plans for the service have been released. If only you wrote that business plan and looked for business finance two years ago when you thought of your great idea the first time then who knows what could have been!

Lovefilm is the top DVD-rental subscription service in Europe. As with Netflix, users sign up for a subscription online and then request DVDs, which are sent by mail. A digital streaming service to PCs, Internet TVs and the Playstation 3 is also available. LoveFilm offers 70,000 titles and has nearly 1.6 million members across the UK, Germany, Sweden, Denmark and Norway.

You also may have been reminding yourself of what could have been by now if you started that great idea you thought of a few years a ago. If you could only get the money together to actually start the business then you may be the next business attracting interest from Amazon or Google or Yahoo, who are all seemingly interested in buying promising start-ups at the moment. So how do you go about it? Where do you get the business finance you need?

Here is a list of four suggestions that have helped me and will help you be successful when raising money from Angel Investors:
Honesty: Angels, partners and investors appreciate frankness when talking about the business they might invest in. Being an optimist is good, but give honest answers, even if it may hurt your chances of having them invest. Bad news is always better than no news or incorrect news.

Communicate: Go out of your way regularly to communicate after investment. Too many people raise money and then fall of the Earth. Investors are left guessing (unless they call a lot) how things are going. It’s is better to over-communicate about the up’s and down’s of your business. No one likes bad news – but surprises are even worse. Take the time to keep your partners updated with exactly what is going on in your business. This takes a lot of discipline as it is easy to fall out of the habit. If you are willing to keep up with it, and your partners make money, then it will be more much more likely they’ll invest with you again.

Understand before being understood: Before trying to get someone to understand your perspective, first try understanding their perspective. Many entrepreneurs only see the up side to their company and its future value. They tend not to see the down side of their idea. Keep this in mind when you are coming up with potential partnership structures. The risk really should equal the reward. I read recently about an angel that owned 100% of the companies he invests in until a certain return is achieved. Once reached, the Angel converts to 20% permanent equity and hands the business over to the entrepreneur as the instant 80% owner. Although some may hate this idea, it’s this type of creativity that may attract angel investors for your new business idea.

Cash is king: No matter how much time and effort you put into a business it will never be worth more than cash. Never. You will be in for a tough sell with any respectable Angels if you try to convince them that you have a lot to lose (your time and effort) if things don’t go well. This is crap! You will feel hurt, disappointment and some pain, but you can get a job or start another company and they are left with a hole in their pocket. Be respectful of this fact and you will be more successful in your negotiations.

Make sure your business plan is well researched and chances are you will actually get the funding you need. Who knows what may lie on the horizon for you and your business?


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