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by Melissa Hancock - Friday, 18th April 2008

"The traditional model that we’ve come in to change is groups representing angel investors," says Cook, "They charge between £5,000 and £10,000 as an upfront fee. And if the entrepreneur is successful in securing funding, they'll take a five per cent success fee of the figure that’s invested. So, for example, if you secure a £100,000 investment, that’s another £5,000."

Cook says that she also knows of many angel groups who insist on taking a five per cent stake in the company.  

"We just thought it was criminal," declares Cook.

So if you've had a flash of divine inspiration for a business and don't want to see it come crashing down to earth because you can't afford the initial funding, then you should really have a look at Angels' Den. 

The site charges £99 for an entrepreneur to create a Business Summary. Once the summary has been successfully submitted to angels, the site invites the entrepreneur to enter a full business plan on the Angels' Den template for a one-time fee of £400. The template guides the entrepreneur through writing the plan and provides them with the necessary financial spreadsheets. Angels' Den also has experts on hand should someone need further advice.  

The entrepreneurs are also required to enter certain fields, such as market sector, to make it easier for the angels to find plans that suit their investment requirements.

If a business plan does inspire one of the angels, they can then arrange to meet the entrepreneurs individually, rather than attending general pitches where they may have no interest in the ideas .

"Angels' Den is a very efficient method because our angels don’t need to read every single business plan and nor do we - we just act as the mediator. We check to see that they don’t say anything stupid and all the boxes have been filled in etc and that’s why we can afford to charge a very reasonable £499," says Cook.

"By comparison, the other angel groups vet every business plan and talk to everyone individually which is a very time-consuming approach. As a result, groups like London Business Angels, which is government-funded, will only look at entrepreneurs who are trying to raise £500,000 or above. So what if you just need £10,000 or £20,000 to get your business off the ground?"

Cook hopes her site will make more funding available for those entrepreneurs who are looking to raise smaller amounts of money. 

"Funnily enough, a lot of the angel groups are now going out of business. A lot of them are DTI-funded but they aren't getting enough investment secured to generate enough income," says Cook. "I think it comes down to the fact that they're over-charging. And angels aren’t daft – they know that if there's a five per cent success fee to be paid, well that’s probably going to come out of their investment."  

In this way, Angels' Den is solving the investment battle for both sides: it's making it quicker, easier and cheaper for the angels to find investment-worthy business plans and for the entrepreneurs to secure an investment.

To read related articles about Angels' Den, click here
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Tags: angel groups, angel investors,