Are there any ‘half Angels’ out there that want to just invest a little?

Hi Aunty B,

I am currently sourcing investors for my first hospitality ‘Boutique Bar’ venture and only need to raise $300,000 to open. As I have developed and designed the logo, bar, furniture, etc, t rather than paying another company to do this on my behalf, the costs have been greatly reduced.

As I have over 20 years in the industry I am very confident that this idea can work both locally and internationally and subsequently want to franchise the idea further down the track. As a result, I have protected the designs and trademarks with IP Australia, as when the venture is opened I believe it will break new ground with the theme and the way service will be delivered. At the end of the day my venture will see a 30% return on investment.

Any suggestions? I am about to approach a bank.
Thanks,
Searching

Dear Searching,

It sounds exciting so good on you for giving it a go. And let’s hope it’s in Sydney. They need more good bars there, partly to cheer everyone up.

On your behalf, I have consulted with a few Angels and VCs, including our blogger Doron Ben-Muir. He points out that it is a very good idea to try and avoid a multitude of smaller investors. The complexity of establishing a new business increases exponentially with the number of stakeholders, as it becomes increasingly unlikely that all interests are well aligned. If this doesn’t pose problems early on…it has a habit of causing significant distractions over time.

As for your advice about angels, it is wrong. Most angels invest between $50,000 to $200,000. Many will invest even smaller sums but will always gravitate to businesses where they believe they can add significant value which effectively self fulfills the investment.

You say you have been in the industry for many years so you should have some successful contacts who you know and trust that might be able to add to your core skills base and share his vision.

The risk is that you expose your ideas to a potential competitor, so have an NDA signed (preferably with non-compete provisions) and target carefully – not for the money alone.

The best people to invest are successful people in your own industry or your supply chain.

It might seem a large sum but in investment terms it is not. The simplest way to go is to mortgage the family home, which means you have few (if any) investors to carry, providing you complete creative and business development freedom.

The problem with family and friends who may know and trust you is they may be ignorant of the market and the risks – a liability which can weigh heavily. In some cases it works beautifully but in others it can be disastrous.

So if I was you I would go with the bank – or hedge my bets – some from the bank and some from a successful entrepreneur in your industry who you trust to come in, stump up a bit of cash and be a partner.

Good luck!
Your Aunty B

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