Kavan Choksi on Angel Financing for Start-Up Entrepreneurs

March 29, 2022
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Donny Raw
Posted in Finance
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Angel financing is a form of business funding wherein wealthy private individuals provide monetary backing to entrepreneurs operating small start-up companies. These investors own liquid financial assetsworthbetween $1 million and $5 million in value. They fall under the category of‘’’high net-worth individuals’’. Angel investors seek astake in the equity of the entrepreneurs’ start-up companies in exchange for providing them with the necessary funds.They even expect the start-up entrepreneurs to pay them a favorable return on their investment. The investment arrangement that entrepreneurs agree to with the angel investors can be either a one-time affair or ongoing financial support.

Kavan Choksi is a leading businessman with expertise in investments and business finance. According to him, angel investorsnormallyshow interest in funding emerging start-up companies operating in specific industrial sectors. These include healthcare, electronics, telecommunication, software, biotechnology, energy, utilities, fast-moving customer goods, and services. They look forcorporations with the potential to offer them a higher rate of return than they will get from traditional investment schemes. Then, the investors will invite the entrepreneurs of the corporate enterprises to present their business pitches. A business pitch is a general overview of their start-up businesses’ formation, vision, mission, financial needs, and strategic goals.

The role of angel investors

The angel investors will carefully review the start-up entrepreneurs’ business pitch. They will ask them certain follow-up questions to analyze their business plan and model during the scrutinization process. Then, the investors will accurately assess the potential financial risks of funding the entrepreneurs’ businesses. They even instruct their in-house networking groups to prepare an elaborate due diligence report with a checklist on the financial issues. After assessing the due diligence report, the investors will fund those start-up entrepreneurs who have the best business pitch. They will then negotiate with the entrepreneurs to formalize a mutually acceptable investment dealcontaining a term sheet. The document covers the following aspects:

Business Valuation,
Capital infusion necessary,
Deal flow,
Deal structure, and
Future profits the investors will earn by selling their stake by implementing the exit strategy.

The angel investors will instruct their lawyers to prepare and register the necessary legal documents when finalizing the investment deal.Then, the exchange of monetary funds between the investors and entrepreneurs takes place.

The advantages of attracting and working with prospective angel investors for entrepreneurs running small start-up companies are as follows:

Ensuresavailability to third-party business funds that helps them to sustain a steady cash flow,
Boosts the credibility and reputation of their start-up companies in the market, and
Allows them to elevate the brand image of their products due to the investors’ influence.

According to Kavan Choksi, start-up entrepreneurs can take their companies to the next level by working with the right angel investors. They offer the entrepreneurs business funds and help them in other areas. These include assistance in generating sales leads, building a brand image, and providing insights into the latest industry trends. However, the angel investors they select should have a good industry network, exceptional leadership skills, and business acumen.