Is your business languishing? Since you’re still in business, it’s apparent that the business was doing well at one point. The good news is that you have learned a lot about marketing your products and customers. The bad news is that sales are slipping. The best news is that you recognize it’s time to do an about face and reinvent your business with the assistance of angel investors.

Though angel funding is viewed by many as primarily being start-up funding, the fact is there is total freedom to seek and structure financing in any way that meets the needs of the angel investors and your business. Using what you have learned in the past, including through mistakes made, you can reinvent your business as if it’s a new enterprise and come out stronger than ever.

It’s also a fact that businesses need to reinvent themselves periodically. The reinvention often comes on the heels of experience, though. People change, the economy changes, the marketplace changes, customer needs change – all good reasons to reinvent your business and rev up revenues once again. Experience can teach entrepreneurs that the business is solid but needs a new approach to penetrate the market, a new service or product to round out its offerings, or perhaps a new look or refined brand image that successfully appeals to the niche market.

It’s a pity that so many businesses with great potential end up going out of business simply because the owners refused to adapt. This became abundantly clear as the recession, and now the slow recovery, unfolded. The economy shifts periodically and the successful business is able to shift with it. Stubbornly refusing to change a brand that has become outdated is not a good business practice even if you have spent years building it. A brand won’t be useful if the business fails because you didn’t listen to the marketplace.

Marching Toward Innovation

Angel investors have proven to be an important source of funding in a sluggish economy. Fueling start-ups by supplying business funding, they also power business reinventions. It makes perfect sense too because angel investors are interested in innovation, new ideas and new approaches. Businesses decide every day to change course to better able meet customer needs or a changed marketplace. Some of the more well known reinventions like Apple computers, GE and HP, are textbook stories of success. Large companies can find business funding through banks and equity partners. Smaller companies can turn to angel investors.

It’s too bad that so many entrepreneurs refuse to about face when all the signposts point in the opposite direction. The benefits of changing course are overcome by the fear of failure, and yet that is exactly what happens in many cases – failure. Angel investors are willing to accept risk if you have a solid business for reinvention in a changing economy and marketplace. Angel investors appreciate innovation and new ideas in any area including:

· Technological innovation leading to new products or services

· Upscale redesign of brand

· Expansion of services or products or services to serve new customers

· Identification and servicing of new market niche

As an existing business, you have a track record that proves you can operate a business, identify a market and serve customers. You can approach an angel investor with proof of success and that is a powerful selling point.

Saluting Your Core Competences

The core competencies of your business serve as the starting point for reinvention. They represent business strengths on which new products and services can be developed. Angel investors can fund the innovation that breathes new life into your business whether you want to expand produce or service offerings, increase market share or re-brand. Show angel investors the value you have to offer customers and they will have lots of reasons to support your efforts with business funding.

Get more advice about business funding at Alliance Group Capital

1. During the past decade, the size of seed rounds has remained stagnant and number of deals have decreased. To the untrained eye, it seems that there is more competition for seed dollars. Below the surface, however, startups are recycling founders experience. The reason why the number of deals has decreased is that teams are better prepared, are more financially savvy, have access to better-priced support, waste less time and resources, are using other forms of funding PRIOR to seed rounds, and are pivoting or deciding to get out earlier -at the pre-seed stage. (Founders will jump into exploring new opportunities).

Founding teams are recycled

2. More firms seeking seed rounds already have sales, expression of interests, and some form of market validation as a result of the circular economy of entrepreneurial mind and action. Firms that seek seed rounds are more advanced than 10 years ago. Founders are using other ways to get funded (as they should! Because seed funding is very expensive!), AND they are also recycling the experience of founding, co-founding, advising, and/or being early employees in previous firms. This is creating a circular economy of entrepreneurial experience. Not just serial entrepreneurs but a large pool of people who have experienced startup development (failed, successful, and everything in between, in so many roles!).

Supplier of funds are recycled

3. More investors are getting into each round, and seed rounds have become more collaborative. More and more small funds, angels and angel groups are co-investing. That means more eyes are evaluating deals (GOOD) but also BAD deals are getting through because the impact of each deal in the overall portfolio is lower, and the FOMO (fear of missing out) can get that signature! Think Theranos (ouch).

TIP: Nobody talks about the herd mentality and there will be some lessons to learn going forward. Because of the cycling and recycling nature of funding, early investors are able to scan deals early, with lower amounts, and, if they want to play in future rounds, they need to get in early and with others: pay to play.

Founders and funders’ recycling is also changing the exits:

4. Exits are being recycled too! Companies are being acquired, taken public, broken into pieces, resold, privatized, re-public’ed, and there are many emerging opportunities for exit. This is actually an area ripe for disruption. Welcome to the world of recycling exits.

And the funding process has become more interesting and complex.

5. As both entrepreneurs and funders become more comfortable navigating many options of funding startups or grownups, new funding options are emerging: there is better knowledge about crowdfunding, cryptocurrencies, hybrids (safes/convertible notes), and SFI-types (can we call this special funding instruments?). Capital suppliers are borrowing mechanisms from SPV, SPE, and SVI. I can’t wait to see what new options sprout of this.

All of these recycling and repurposing has an impact on ROI and capital markets

6. Cycles are longer: It takes longer to climb a larger mountain, especially if, along the way, there have been some quasi-exits, pivots, more and larger rounds. This is having an impact on the way we negotiate funding going INTO the firm, because there is light at the end of the tunnel, but the tunnel is getting much longer. Combine this with the uncertainty of how investors get OUT. Again, this is an area ripe for disruption and I can’t wait to see new options emerging. With longer cycles, the return on investment decreases, so firms are pushed into finding new and disruptive ways to excite investors and NEW investors who supposedly are more risk-averse and adventurous, but in reality are reckless.

Longer roads need more resources,
But the supply of capital does not exist in a vacuum

7. Public markets are shrinking, and investors -especially institutional investors- are navigating through a rollercoaster of political insanity. Mostly derived from the surprising interest in protecting borders than in having healthy global economies, financial and economic illiteracy is permeating the political arena where decisions are reckless and financial managers are focusing on reducing stupid (gasp) risks instead of creating and supporting new wealth.

Overall, a combination of healthy recycling of talent, capital, and technology is fueling the economy despite mistakes made by politics.

For investors the signals are clear: Get in early, support many startups, learn and collaborate.

For entrepreneurs the signals indicate: Use many forms of funding, use dynamic funding, ask investors for support (not just money), and create dynamic teams.

Oh, and for small business owners that think “small is beautiful”, now, more than ever, my famous quote of 100% of 1 is 1, but 1% of 1000 is more, is more valid than ever. Get in line, ditch the illusion of a “safe” and embrace the “growth” mindset. If we stop growing, we start dying. Small IS beautiful, it is just not sustainable.

For Government and Economic Development Agencies, the puzzle is getting more and more complex… Hang in there!

We really don’t know what we are doing, but we are doing!

Alicia Castillo Holley is an international expert on Wealthing (R) a system to create wealth. She has started 9 companies and one not-for-profit, raised millions of dollars and trained thousands of people. She’s a recognized author and speaker and travels around the world twice a year as a speaker /trainer. http://www.wealthing.com

I see it happen a lot lately in Jakarta. Startups with 4-5 founders who are pretty much equal shareholders will look for very early Angel funding, which (if they get it) brings another shareholder on board.

Now you’ve got a situation with 5-6 shareholders in a company that still has to land its first serious funding. This is in my opinion a situation far from desirable, for some obvious and some less obvious reasons.

In general, when a startup approaches an (angel) investor for a pitch and shares that the company has 4 or 5 shareholders with pretty much similar voting rights, my first question would be “Who wants to give up his or her shares?”. It’s just too early to have so many shareholders. Startups succeed for a large part because they can make decisions instantly, and react faster than competitors, who are often more “corporate”. With having 4 or 5 voting shareholders on board, chances are your company won’t be that flexible and dynamic anymore. Also, any investor would prefer to just talk to 1 or 2 persons, which for them is just more clear and manageable.

But let’s look ahead a bit. Let’s say your startup has 4 founders with equal shares and voting rights and you land an angel investment who “after-money-in” gets 20%. So now your startup has 5 shareholders and a capital to last a year. I’m making this assumption because I’m mostly talking about digital startups that will need a longer period to become bootstrapped and even when bootstrapped will require more (growth) capital in the future.

In my experience (and I was one of them as well), startup entrepreneurs tend to ignore looking into the future. This is often because startup entrepreneurs have a very positive outlook on life in general, and specifically on their business. But in most cases it’s clear as day that at some point you will need extra capital, whether it’s for compensating losses, solving cash-flow issues or growth capital. This is where investors will strike, a (most of the time) non-profitable company in need of quick cash is an easy target. The result is the existing investor or a new investor will take a large part of the shares resulting in the founders diluting to a questionable percentage while still very much in startup phase.

Needless to say that as a founder you won’t be too happy diluting to let’s say 10-15% after just 1-2 years. But also from investor point of view this is not really the ideal situation. Many shareholders who are all less incentivized doesn’t strike me as a perfect situation. The simple solution of buying out some of the shareholders often fails because there’s simply no value yet so why would they sell?

My tips to anyone planning to start a digital business would be:

1. 1. Start with just two founders;
   2. Don’t give people shares because you can’t pay salaries (!);
   3. Hold of any (angel) investment as long as possible, create as much value first. If needed borrow money from family or friends or find alternative income sources;
   4. Plan ahead! Talk to people who have been there and be realistic in your expectations. In any case avoid a situation in which you need money urgently, this will put you in an unnecessary weak position in any negotiations;

To anyone saying “That’s easy when you have money!” True, so be creative and work hard. Many digital startup entrepreneurs have alternative income sources. In the early days of Tokobagus we were selling e-commerce development services which allowed us to pay the bills and work on building Tokobagus.

Are you involved in a really early phase (digital) startup and considering to get (angel) funding to make life a bit easier? Wanna pay some of your key staff with shares instead of salary? Though money is both a problem as well as a necessity, you might want to read this first.

Venture capital firms are different from private investors in that they have raised capital from a number of high net worth individuals with the intent to make investments on their behalf into promising start up companies and expanding businesses so that they can ultimately take the business public via an IPO or sell the business for a substantial earnings multiple. There is not a single business that does not face any type of specific business risk that should be addressed within your business plan. You should showcase, within your business plan, how you’ll deal with an economic recession as it relates to remaining profitable and cash flow positive. The primary difference between private investors and venture capital firms is that these individuals tend to live in areas where there are a number of other high net worth individuals. In some instances, you may be able to finance your business through credit card receivables if you’re already in operation as an alternative to expensive equity capital financing.

Angel investors usually have a net worth of $500,000 to $1,000,000 although this number may be higher in selected metropolitan areas. It should be noted that venture capital firms will typically take 30 days to 60 days to make a decision as it relates to the capital that you need. Most angel investors are prepared to make their investment decision within two weeks of receiving your proposal. In any document that is specific for a angel investor or venture capital firm should have appropriate disclosures as it relates to the risks associated with business which should be drafted by an attorney. When you’re developing your business plan for an angel investor or venture capital firm, it is extremely important that you dismiss your emotions in the product or services that you is that you sell.

We recommend that you have your attorney present during your first meeting in order to make sure that the individual is a legitimate investor or venture capital firm that is willing to make a significant investment into your business. It should also be noted that there are firms out there that can introduce you to angel investors or syndicated individual investment groups when you are seeking private equity capital.

The primary difference between an individual investor and a venture capital firm is the amount of capital that they are willing to provide you with as it relates to making an equity investment into your firm. As such, if you are seeking less than $5,000,000 then it may be in your better interest to work with an angel investor rather than a large scale investment firm.

Matthew Deutsch is a prominent business plan writer. His work has been included in nine books pertaining to this subject. Additionally, Mr. Deutsch has written extensively on subjects regarding entrepreneurship, small business lending, angel investing, and other related topics.

Venture capital firms are different from private investors in that they have raised capital from a number of high net worth individuals with the intent to make investments on their behalf into promising start up companies and expanding businesses so that they can ultimately take the business public via an IPO or sell the business for a substantial earnings multiple. There is not a single business that does not face any type of specific business risk that should be addressed within your business plan. You should showcase, within your business plan, how you’ll deal with an economic recession as it relates to remaining profitable and cash flow positive. The primary difference between private investors and venture capital firms is that these individuals tend to live in areas where there are a number of other high net worth individuals. In some instances, you may be able to finance your business through credit card receivables if you’re already in operation as an alternative to expensive equity capital financing.

Angel investors usually have a net worth of $500,000 to $1,000,000 although this number may be higher in selected metropolitan areas. It should be noted that venture capital firms will typically take 30 days to 60 days to make a decision as it relates to the capital that you need. Most angel investors are prepared to make their investment decision within two weeks of receiving your proposal. In any document that is specific for a angel investor or venture capital firm should have appropriate disclosures as it relates to the risks associated with business which should be drafted by an attorney. When you’re developing your business plan for an angel investor or venture capital firm, it is extremely important that you dismiss your emotions in the product or services that you is that you sell.

We recommend that you have your attorney present during your first meeting in order to make sure that the individual is a legitimate investor or venture capital firm that is willing to make a significant investment into your business. It should also be noted that there are firms out there that can introduce you to angel investors or syndicated individual investment groups when you are seeking private equity capital.

The primary difference between an individual investor and a venture capital firm is the amount of capital that they are willing to provide you with as it relates to making an equity investment into your firm. As such, if you are seeking less than $5,000,000 then it may be in your better interest to work with an angel investor rather than a large scale investment firm.

In the convoluted microcosmos of Silicon Valley, it is more common to find a person who is an ‘angel investor’ than a person who owns a bike. Angel investors by definition allocate a small amount of their own investment funds to support companies that give companies a financial taxi lift. One thing few people realize is that to get into that taxi you need to be ready, and you need to know where you are going, and when do you think you will get out.

So, in financial terms to access angel investments you need to:

1. Get yourself to the taxi: you need to be able to walk on your two feet, or with the help of a device. We don’t invest unless you have an established company, a tax id, a defined product or service, a prototype or a defined set of promises, some form of market validation (sorry your friends do not count). We don’t take crawling babies without parents – but we take babies with parents and we call that pivoting. And yes, both babies and parents get out on the next stop.

2. Carry a wallet. Have some skin in the game. The best way to put this in perspective is this: if you are not going to take a risk, I’m not taking it for you.

3. Speak the language. To understand each other we need to speak the same language, and in many many cases that means that the financial language needs to be clear to you. Oh yes, and the business language, and the execution language. You don’t need these languages to apply for some jobs, but if you want the title of entrepreneur, you need the language to get hired.

4. Have direction. Knowing where you are going and how to measure you are on the right track is critical. Yes, there might be accidents but you can do a plan B on the spot if you know where you are going. It also helps if you know the route, if you’ve taken a similar route before or if you have advisors along the way that can check in. Or you can take a ride with others and everyone benefits.

5. Accept some guidance. You might know the route, the goal, and the starting point, but we are in the business of transportation. We are in this day in and day out, and know when and where there is traffic, bottlenecks, stop signs, and landing spots. We also know the best time to take off, run, and go. And we know what has changed or not since the last time you took a ride.

6. Plan your exit. Taxis need your space to carry more passengers. You will need to get out at some point. I once said that the best description of the angel investor- entrepreneur relationship was this: how can we part ways and be happy about our time together? This is one of the most exciting opportunities to create something in such a lose structure. Angel investors invite entrepreneurs to their taxis at the expense of other rides, they spend time and resources together, and they expect financial and emotional rewards. We want to feel good about taking you from here to there. Entrepreneurs must also choose who they take the ride with. You can’t go to the moon in a bike, but you can enjoy the ride in a different way, and you will NEED that taxi to take you to the shuttle’s landing, or the airport, the train station, the port.

Thinking about Angel Investing as a time-defined transportation helps you manage this funding mechanism, but if you want to fund your company, whether it is a small company or a young one, there are many other ways to do it. Don’t limit yourself thinking that angels are the only ways to fund a company. Sometimes there not, and sometimes there are not even the best way.

Having an angel invest in your company does not define your success.