# Angel investors and navigating the waters



## kikkoman (Oct 30, 2007)

So I posted a similar topic several months ago and got some great responses. I used that info, and long story short my business (in formation) has gone from 4 to 2. Which is okay but now we are ready to really find an investor and get things rolling.

I've spent the last 6 months getting our business plan together and we feel as though we have a great market, excellent access to it, and a plan that is very solid. Now is the time for an investor to come in and get the ship moving. So I had a couple of questions about angel investors and realistic expectations from them and what I should offer. 

I know an investor is going to want a return on their investment somewhere between 10-20%. So we are thinking on offering them a 15% return on the investment. However since we are a complete startup I'm assuming they will also want a piece of the company, to help compensate for taking such a large risk. Of course we would like to keep this to a minimum as much as possible, so we are looking to probably offer them 15-20% of the company as well. But heres the question. If we don't want them around long term, which they probably don't want to be anyway, then how do we work the buyout? Is it normally set up that we would pay them back 15% on top of their investment and then have to buyout the 15 percent of the company too after the loans been paid in fully? 

We want an exit stategy that works for everyone, but I wanted to get a sense of what you all thought. If you were an investor and we offered you 15% interest and 15% of the company with a two year buyout option, would you laugh us out of the room, or does that sound reasonable? Remember we haven't sold one shirt yet, so I know we may have to negotiate some but we want to protect ourselves too. 

As a side note the investor will be a silent partner. Opinions? 

Thanks,

Daniel


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## Comin'OutSwingin (Oct 28, 2005)

Daniel, here are a couple of links that should help you out. They are from a site called fashion-incubator, and are a blog by Kathleen Fasanella.

Kathleen has been in the industry a long time, and speaks from experience.

You can also find a link to her site on the left menu bar under "T-shirt Sites".

Check these out, and I hope they can help:

Fashion-Incubator: How to find investors for a clothing line pt.1

Fashion-Incubator: Investing in a clothing line


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## tim3560 (Jan 7, 2007)

Comin'OutSwingin said:


> Daniel, here are a couple of links that should help you out. They are from a site called fashion-incubator, and are a blog by Kathleen Fasanella.
> 
> Kathleen has been in the industry a long time, and speaks from experience.
> 
> ...


Great articles Greg. It really helps to show that getting an investor isn't as simple as accepting a check.

BTW, looks like you have to write your book after all. I started looking through your old posts and they only go back 500 or so. Looks like you had already asked all of your questions by then. Let me know when the book's ready!


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## kikkoman (Oct 30, 2007)

Greg,

Great links. I will be tweaking a few things because of it. One thing though is a production plan. I guess I haven't completly finished a production plan, which I figued would come somewhat after the funding and knowing what we were working with. 

Apparently to impress the investors they want to see everything from start to finish before they give any money. Understandable but hard to a challange to map out. 

How do you feel about those percentages though mentioned on the orginal post? Still trying to get a feel for what's realistic and a good balance for the company and the investor. 


Thanks,

Daniel


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## Comin'OutSwingin (Oct 28, 2005)

> How do you feel about those percentages though mentioned on the orginal post? Still trying to get a feel for what's realistic and a good balance for the company and the investor.


Honestly, I don't have a clue.

I've never considered having investors, so I never really looked into the numbers.

Just from the outside looking in and playing devil's advocate, I really don't know why an investor would want to invest in a clothing line with someone that's never had a clothing line, unless they were going to get much more than 10-15%.

I can invest in a good growth stock mutual fund, and do better than that. And it's probably more stable than someone starting a business in an industry in which they have no experience, and the high failure rate of start-up companies.

But that's just me thinking out loud....


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## Peace2TheRest (Feb 6, 2008)

I am a senior communications and business entrepreneurial development major, my advising professor who has his degree from Harvard business, and a masters from USC, and I just got done discussing Angel Investment. From what he told me, true angel investors are a extremely rare thing, they usually want a very high return on their investment, and 99.9% of the time will not support a business, or businessman that has no business experience, or an extremely average idea for a product. Angel Investors are prototypically inclined to seek out technologically advanced products, and real estate investments. Not a business that has so many competitors, and not a large chance of return. Usually the angel investor stories you hear are peoples relatives, friends, or fools, lol. 
The best advice I can give you would be to either start off a lil smaller, and more realstic, test your waters, prove your sales skills, marketing skills, management skills, gather experience in the field of clothing, and then approach someone with a proven working system that makes money. This will not only open you up to banking options which keeps you in house, but also shows an investor you took the time and effort to really make it work and that you aren't in it to use their money for your own purposes. They need to feel like they are using you, not other way around. 
If all else fails look for the fool with too much money and make it happen. 
I'm all about the american dream, otherwise I wouldnt be here learning. 

p.s IN EVENT OF GETTING A MEETING
Best advice from a business standpoint, do not make your profit to loss margins seem unrealistic, a true invetor will check the business out, compute the chance of you making money which by computer and banking standpoints is not good (these things do not take into consideration drive, ambition, hard work, marketing, or bad *** designs) and if your numbers are inaccurate, or padded, they will pretty much tell you to get out of their office, also they will ask you a ton of questions so be ready to answer all of them, finally use your enthusiasm, and excitement to draw an investor in...if you seem positive it will work and are charismatic, it will rub off.


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## sonambulo (Sep 22, 2007)

yep, i have to agree with ryan. if you cant show that you have tested the market and found a substantial market, you wont get an investor. unless you have an idea that is truly revolutionary that he believes in.

my advice: start small (cafepress/ your own site/ heavy ground marketing/word of mouth), like ryan said, prove yourself, ur drive, ambition, ability to run an operation responsibly/profitably THEN approach investors.


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