Joe Abraham

Answers to Raising Capital

// October 1st, 2009 // business startup

Here’s a question that came in from an entrepreneur. It identifies a common mis-understanding about Angel investors. Hope this helps others reading the blog.

I’m starting up a bicycle restoration shop / bicycle themed bar in the heart of Williamsburg Brooklyn. I’m also considering purchasing a mixed-use investment building on the Bedford ave strip in which the startup will sign a lease [maintaining two separate entities]. 

In your opinion – should I focus my efforts on pitching a package deal with both the startup business and the real estate – or will I find it easier to attract larger pools of investors by keeping them separate? Also, introductions or tips for networking with angels are much appreciated. Thanks.

Joe’s Answer

Ryan, an angel investor will be very concerned if it looks like you are going to have to wear 2 hats (bike shop owner and landlord). Angel investors tend to focus on very specific industries and seldom like to cross-over to industries that they do not have deep domain expertise. So assuming you found an angel interested in the real-estate deal, the chances of them having a retail focus are slim to none. It will end up deterring from your success in raising capital.

Here’s the real kicker though… A VC/angel investor (in the traditional sense of the word) will not invest in someone who does not have a proven track record of having started up/built/sold a business already. In other words, unless this is your second bike shop project (with the first one having been very successful), you’ll have a hard time getting an angel investor’s interest. Most traditional angel investors are former VC’s and they act, think and invest like a VC. The only difference is that they are on their own and working with their own personal pool of funds. They will be looking for your educational pedigree (MBA), industry track record, management team and the industry type.

Now if by angel investor, you mean a high-net-worth individual who would take a liking to you and your project, you may be in luck. You’ll find the everyday millionaire everywhere.

Try some biking meetups in your area (meetup.com) and see if a wealthy executive, entrepreneur or retiree takes a liking to you and your project.

Network with people in your sphere of influence and find out who they know that likes doing real estate deals.

Connect with sales professionals in your area (high-end auto sales, real estate, financial services) and tell them about your project. They will have a working relationship with your target audience.

So in summary, based on your project, I’d steer away from traditional angel investors (retail and real estate are industries where there is little-to-no angel investing going on).

Focus instead on high-net-worth individuals in your area who have a passion for real estate or biking. Get around them. Share your vision and you may be pleasantly surprised with the results.

Your Fan,

Joe…