Pricing a Company for Angel Investment

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When a new venture is raising money from angel investors, a real deal killer is getting hung up on pricing. Entrepreneurs want to attain the highest price for shares of their corporation. That is, they want the least dilution of their ownership. But price should not become a significant factor in arranging investor funding.

Wise entrepreneurs know that there are considerations other than price to selecting the right angel investors. Founders of a startup company should seek investors who provide capital in uncomplicated transactions. In addition, the best angels are those who add expertise by complimenting the skills of existing management. The right investors want to keep the existing team in place. These funding sources are preferable even if when they offer a lower price per share for acquiring an investment in the company’s stock.

Financial transactions are an opportunity for entrepreneurs to bring influential owners to the company. Price does matter but it’s not the most important issue. The key element is blending existing shareholders with new investors who share the same vision for the corporation. The right chemistry among founders and outside investors is paramount. This means that the price obtained to bring in new capital should fall within a range rather than become a fixed consideration.

To find the optimal angels, entrepreneurs should ask prospective investors about their thoughts on the company’s brand image. Attaining success in business requires sound focus on a target market. The right investor helps guide a company toward that target.

Ask what goals the investors agree are reasonable within specified timeframes. Satisfied investors become eager to fund future rounds. But entrepreneurs should also examine how investors will react to setbacks. A startup must maintain flexibility in the process of discovering how to deliver superior experiences for customers.

Commitment to doing whatever is required for the best results involves both corporate management and outside investors. And that commitment transcends the share price for acquiring investor money. Successful entrepreneurs embrace their relationships with angel investors without any regrets.