In the last year a new term has started to appear in the USA and occasionally in the UK: Super Angel. Why are Super Angels different from Angels? What marks these people out as special? What have they done that Angels haven't? Is a Super Angel a person or a fund? The definition of Super Angel is evolving; in this blog we look at the current state of play.
As a Business Angel, I want to know how I am going to get my investment in time and money back. That means something needs to be sold… what? What can a company sell in order to generate some cash? How can the entrepreneur maximise the value? What sort of buyer should we be looking for?
Finding the right buyer maximises the value of your company. So what does your company have that you call sell? There are five things: the technology, the people, an income stream, customer list and brand. If you and the buyer match on all five, you’re onto a winner. Let’s look at each in more detail:
- The Technology. During the time that your company has been operating it will have amassed some technology – it may be trade secrets, patented, copyrighted, etc. Your technology will have unique properties that allow your company to fulfil a need better than anyone else. This technology has value and can be sold by way of an exclusive license or company sale. The buyer may want the technology to enhance their own products, fill a gap in their product range, access another strategically important market or simply to remove the technology from the market.
- The People. The employees of your company will have a variety of expertise and knowledge. If there is a premium on their skill set a potential acquirer may look to buy the company because they need the people. The downside is that the deal will depend upon locking the people into the new company and this may prove difficult to negotiate.
- An Income Stream. Your products may provide an income stream through on-going support and/or an increasing number of products sold. This income stream is attractive to any buyer especially if they can see that there is (a) potential for increased income in the future; and (b) the ability to use their own channels to increase sales of their or your products.
- Customer List. Selling large ticket items requires building relationships with customers and industry leaders. A prospect may save time, money and energy by buying a company with all the connections already established. These connections could be used to deliver other products as well as your own. This quick route to market has a value.
- Brand. Being a well known central point for information or technology to solve a problem has a value to someone who wishes to see other products or services to the same target market.
There is usually no clear demarcation between these aspects during the sale process itself. Therefore the thought processes behind presentations need to be clear and ensure all aspect are covered and demonstrated. It’s all about realising the true value of the company.
As a Business Angel, I’m looking for someone who is aware of all these benefits and is working to increase all of them. And how does an entrepreneur demonstrate this? When they are selling shares in their company…