Startup businesses are often built on a dream. Maybe you’ve had a passion for spirits for a long time and you’ve decided you want to share it with the world. Starting a beverage company comes with a lot of startup costs and processes. So how do you make the move from a general idea to a concrete business?
Beverage angel investors are a great way to get that initial boost you need to get your spirits company off the ground, or expand your business to reach new markets.
And while they might sound like a gift from above, angel investors are actually very pragmatic and business-minded individuals that can have long-lasting effects on your business.
Is this the best route for your spirits business to secure financing? Let’s learn more about what a beverage angel investor actually is, how it can affect your business, and how to find them.
What is an Angel Investor?
There are many different ways a small business can get the money they need to fund their initial startup, or cover any potential expansion costs. Each method is going to have it’s own positive and negative aspects which your business will have to weigh against each other.
Angel investors are individuals that are interested in providing this capital to small businesses with the expectation of a high return on their investment. They are typically people with a large amount of cash on hand. They are able to provide these funds based solely on their personal discretion, as opposed to a bank loan which will look at more concrete factors.
However, unlike a bank loan, these investments are not made with a negotiated interest rate. Angel investments are a type of equity financing. This means the investor will provide the money in exchange for an equity position in the company.
What is Equity?
The equity of a business is what’s left over after you subtract your outstanding debts from the available assets. This represents the value of the company as a whole.
Shares in the equity of your business essentially equates to ownership of the value of the company as a whole.
Equity financing is frequently used by businesses that don’t have anything else to leverage as collateral against a standard loan.
This puts beverage angel investors in the middle of the scale of potential investors in a small business. Family and friends will often offer smaller loans to help a business get started. Venture capitalists will offer higher amounts to businesses looking to make a large expansion. And angel investors sit in-between, willing to make a sizable investment in exchange for equity.
Visit Brindiamo Group to learn more about financial solutions for beverage companies!
Benefits of Angel Investors
The first benefit of utilizing beverage angel investors is that there is a much lower amount of risk assumed in the transaction. You are going to be liable for a business loan no matter how well your business performs. Angel investments don’t need to be paid back if your business fails.
There is also no accrued interest.
Angel investors are able to make their decision quickly, as they don’t have to go through an extensive approval process. This helps inject capital into your business when you need it most.
And even though you most likely already take your business very seriously, many see an increase in discipline when working with an angel investor. There is an extra layer of scrutiny to your performance now that it directly affects the investment of somebody else. This helps some stay on track as they move forward.
Disadvantages of Angel Investors
The main disadvantage is that owners give up a portion of their business to an outside individual. The angel investor will be entitled to an opinion on the way the business is run since they will have a share in the profits moving forward. This includes any money made from the sale of your business, should you decide to sell.
The window in which a beverage angel investor may be suitable is fairly small. It won’t be worth signing away a portion of your business for a small amount of money, and it will be difficult to find an investor for a large amount of money. The specifics can make it difficult to locate a suitable arrangement.
Finding Beverage Angel Investors
Networking is often one of your best ways to be introduced to an angel investor. Many like to work within their local community, so get out and meet other local business owners. Not only can this network create a beneficial partnership in the future, you can help each other with considerations such as securing funding.
There are a handful of online resources to help connect investors with small businesses. Angel Capital Association, for example, is one of the largest organizations of angel investors.
Those in the spirits industry can work with leaders in the industry to find appropriate sources for funding. Brindiamo Group has been facilitating connections between investors and small businesses in the spirits industry for years. Visit us today to see how we can help you get the funding you need to grow your business.