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How To Become A Business Angel: Practical advice for aspiring investors in unquoted companies

Book Description

Becoming a successful angel Angel investors are the most important source of capital for UK companies seeking up to £2 million in funding. This importance to the British economy is recognised by the government, which means that attractive tax breaks are available to business angels. Added to this, helping start-up ventures with money and mentoring can be satisfying and fun. If you have considered taking advantage of these tax incentives by making angel investments, or find the idea of providing capital to entrepreneurs - and the potential financial rewards of doing so - appealing, then your starting point should be How to Become a Business Angel. Richard Hargreaves has 40 years' experience making investments in unquoted companies and as such is well placed to guide those who are new to the area through the process. He knows what to look for in potential deals, the risk-reward structure angels should demand, the times when legal advice must be taken and the pitfalls to be wary of. In a concise, readable manner, he provides practical guidance to all aspects of investing in unquoted companies and gives numerous invaluable case studies from real-life deals so you can see how angel investments work in practice. You will learn: - Whether angel investing is right for you - How to find and assess opportunities - What investment terms angels require - How to manage investments you have made and resolve problems that arise - How to exit from investments - Lessons from real-life deals that went well, and badly, through detailed case studies If you are looking to build a portfolio of investments in unquoted companies, wish to learn more about the technical side of investment, such as share capital structures and investors' legal rights, or wish to invest your capital in entrepreneurial ventures in the most effective for both you and the entrepreneurs, then this book is for you.

Table of Contents

  1. Cover
  2. Publishing details
  3. About the Author
  4. Preface
  5. Introduction
  6. Part A: Angel Investing
    1. Chapter 1: The Basics
      1. Introduction
      2. The importance of angels
      3. Where angels fit within the financing spectrum
      4. Why angels are attractive investors
      5. Case Study
      6. Summary
    2. Chapter 2: Deciding Whether to be an Angel
      1. Introduction
      2. Are angel investments for you?
      3. Portfolio considerations
      4. Other approaches to investing in unquoted companies
      5. Case studies
      6. Summary
  7. Part B: Investment Opportunities
    1. Chapter 3: Finding Investment Opportunities
      1. Introduction
      2. Matching entrepreneurs and angels
      3. The importance of deal flow
      4. How to find opportunities
      5. Summary
    2. Chapter 4: Assessing an Opportunity
      1. Introduction
      2. The balance between risk and reward
      3. Initial screening checklist
      4. Management team and its vision
      5. Business model
      6. Product and market
      7. Development risks
      8. Financial planning
      9. Cash requirement
      10. Pricing model
      11. Scalability
      12. Exit
      13. Case studies
      14. Summary
    3. Chapter 5: Investment Terms
      1. Introduction
      2. When do you write your cheque?
      3. Structural matters and investment instruments
      4. Entry valuation
      5. Deal benchmark
      6. Common issues when negotiating terms
      7. Case studies
      8. Summary
    4. Chapter 6: The Enterprise Investment Scheme (EIS)
      1. Introduction
      2. Historical note
      3. The EIS tax benefits
      4. How EIS can enhance your returns
      5. Qualifying for EIS benefits
      6. How to claim EIS relief
      7. How to lose EIS relief
      8. Cautionary notes
      9. The Seed Enterprise Investment Scheme (SEIS)
      10. Summary
    5. Chapter 7: Legal Documentation
      1. Introduction
      2. Changed rules for private companies
      3. The legal framework
      4. Case studies
      5. Summary
  8. Part C: Managing Investments
    1. Chapter 8: Active investment management
      1. Introduction
      2. Initial formalities
      3. What you should expect from the company – and they from you
      4. The board
      5. Areas of influence of NXDs
      6. Case studies
      7. Summary
    2. Chapter 9: Resolving Corporate Issues
      1. Introduction
      2. Failure to develop to plan
      3. Predicting cash needs
      4. Financing cash needs
      5. People problems
      6. Litigation
      7. Case studies
      8. Summary
    3. Chapter 10: Resolving problems with other Investors
      1. Introduction
      2. Investor characteristics
      3. Relationships between investors
      4. Approaches to structure
      5. Investor consents
      6. Funding rounds
      7. Time horizons and approaches to exit
      8. Changes in investor manager
      9. Case studies
      10. Summary
  9. Part D: The Exit
    1. Chapter 11: General Principles of Exits and IPOs
      1. What is an exit?
      2. Flotation or initial public offering
      3. AIM
      4. Case study
      5. Summary
    2. Chapter 12: Sale: Strategies and Process
      1. Introduction
      2. The trade sale
      3. How a business is valued by a buyer
      4. Enterprise value
      5. Case studies
      6. Summary
    3. Chapter 13: Sale: The Consequences of Different Structures
      1. Introduction
      2. The importance of tax
      3. An overview of investors’ tax positions on exit
      4. Structured sale proceeds
      5. Sharing exit proceeds with premium protection
      6. Warranties and indemnities
      7. Possible conflicts between management and investors
      8. The private equity sale
      9. Partial sale
      10. Case study
      11. Summary
  10. A Final Thought
  11. Glossary