Angel Investor Thoughts

[Garrett17]

Hi.

I am a farang who owns a Thai based and registered beverage business. It has been operating (meaning sales) for almost four years I have invested my own money to date (so yes I have skin in the game) but now I want to increase my production capacity and to do that I am exploring the idea about an angel investor in Thailand. Ideally I was hoping to find a source of debt equity for roughly 2.6 million baht.

Although I am financially literate (MBA). I am a pure novice when it comes to looking for outside financing. I wonder if anyone has experience in securing outside funding from an angel investor especially for debt equity. I would love to hear about this experience and to get tips on the process. Bonus, if I can get a name or two but I am doing the standard Google searches, LinkedIn etc. Ideally, I would love to connect with someone who is also in the food and beverage industry.

In short, I want to be more informed about this process.

Any advice?

Please note that I do not want to be contacted by people who can help me for a "fee." Either you have gone through the experience <snip> but I really don't want to get on a telemarketers list so that I am called on weekly to be offered a list of financial services.

Thanks so much in advance for your help!

[vaultdweller0013]

Have you tried banks? If you have been running a profitable Thai business for 4 years, getting a 2.6 MB SME loan should be trivial.

Angel investors want ownership. Its the only way to justify the risk. They make their money on the one breakout success among the several failures.

[blackcab]

Can you define what you mean by debt equity please, just to avoid confusion.

Also a rough summary of your business figures would help.

Is the business profitable yet? What's the turnover? What's the profit?

What percentage of the business would you exchange for 2.6m baht? How did you reach this valuation?

Edited May 5, 2016 by blackcab

[jaycor]

There is a new company called "BeeHive" this is doing Peer-to-Peer lending for SME's. Basically structured loan products of 12, 24 or 36 months. It would be probably be your best bet for something like this.

edit: site is beehiveasia.co.th

Edited May 6, 2016 by jaycor

[Garrett17]

@vaultdweller0013. I just received the telephone number for the person in charge of SME at my bank. I will look at that path. However, a bank will want to see collateral and inventory. I do not require a lot of equipment to produce or sell my beverage nor do I have a tremendous amount of inventory. This will make me a poor candidate for a loan. It's a bit of chicken and egg. I need money to grow / create more production but to do that I need collateral to act against the loan which in my case is hard.

I do not fully agree that angel investors want ownership. That is definitely one type but I am not after venture capital / equity finance. I am looking for someone who can offer debt equity such as a line of credit. I would be willing to offer an equity percentage but I would prefer to offer a higher rate of interest on a loan to counter the risk and made the reward worthwhile.

[Garrett17]

Can you define what you mean by debt equity please, just to avoid confusion.

Also a rough summary of your business figures would help.

Is the business profitable yet? What's the turnover? What's the profit?

What percentage of the business would you exchange for 2.6m baht? How did you reach this valuation?

I mean something like a line of credit or a loan.

The 2.6 million is not a valuation of the business. It is the investment needed to cover production and a small salary.

As for what percentage of the business would I exchange that is something that would have to be discussed. I do understand it has to be worthwhile for the investor but I am not looking to lose control of my company. This is why I prefer to go the debt equity route but again, I recognize it helps for the investor to feel part of the dream should things go exponentially.

[Garrett17]

There is a new company called "BeeHive" this is doing Peer-to-Peer lending for SME's. Basically structured loan products of 12, 24 or 36 months. It would be probably be your best bet for something like this.

edit: site is beehiveasia.co.th

Thanks so much jaycor for this suggestion. I really appreciate and I will look it up now!

[Esterhazy]

Hi,

I'm a new member with no post history, but I'd like to offer what I can. I am from New York, and have expertise in fundraising, investments, and private equity--including early stage investments which are generally called "angel investing" or "venture capital."

What you are actually asking for is a kind of bridge or expansion loan, which is not appropriate for angel investment. Typically, angel investors want to make huge returns for their investment, since early-stage investment comes with extremely high risks (they want to be compensated for the additional risk), and it sounds like you want to minimize how much you have to pay for the financing you want to receive. You typically get a loan like this from a bank, although you might find a rich friend (or two) who could be interested--these two are really your only options unless you're willing to offer equity in your business, in which case you can start talking to rich people (who aren't your friends) and pitch them the opportunity.

To give you an example, a friend of mine started a company to provide bespoke private jet flights from LA to London. He needed $1,000,000 USD to get it off the ground, but since the business would make money despite limited growth, he networked for three months and found two guys to come in as partners and provide the capital. This was not an angel investment per se, but really a "friends and family" investment, since the partners wanted to do business with my friend, instead of seeking to own a part of a private jet charter. They took 40% equity in exchange for the capital, but they opened their rolodex to my friend and made sure the first 12 months of flights were booked solid by promoting the new venture to their network.

This is how an angel or high-net-worth friend investment in your business would sound like. When you're offering a high-yield debt instrument so you can expand your current operations, well that's just a fancy way of saying bank loan.

Hope that helps.

[Garrett17]

Hi,

I'm a new member with no post history, but I'd like to offer what I can. I am from New York, and have expertise in fundraising, investments, and private equity--including early stage investments which are generally called "angel investing" or "venture capital."

What you are actually asking for is a kind of bridge or expansion loan, which is not appropriate for angel investment. Typically, angel investors want to make huge returns for their investment, since early-stage investment comes with extremely high risks (they want to be compensated for the additional risk), and it sounds like you want to minimize how much you have to pay for the financing you want to receive. You typically get a loan like this from a bank, although you might find a rich friend (or two) who could be interested--these two are really your only options unless you're willing to offer equity in your business, in which case you can start talking to rich people (who aren't your friends) and pitch them the opportunity.

To give you an example, a friend of mine started a company to provide bespoke private jet flights from LA to London. He needed $1,000,000 USD to get it off the ground, but since the business would make money despite limited growth, he networked for three months and found two guys to come in as partners and provide the capital. This was not an angel investment per se, but really a "friends and family" investment, since the partners wanted to do business with my friend, instead of seeking to own a part of a private jet charter. They took 40% equity in exchange for the capital, but they opened their rolodex to my friend and made sure the first 12 months of flights were booked solid by promoting the new venture to their network.

This is how an angel or high-net-worth friend investment in your business would sound like. When you're offering a high-yield debt instrument so you can expand your current operations, well that's just a fancy way of saying bank loan.

Hope that helps.

Hi Ester(?). Thanks for your insight. New to the site (I am too) or not, I appreciate it either way.

It has been my impression that there is a difference between Venture Capital and an Angel Investor. The former wants equity and looks to invest larger sums of money while the latter can be that but may also we willing to offer debt equity (loan, LOC etc) because they believe in the owner of the business, see the potential, are willing to invest a smaller sum and perhaps are looking at the investment with a social lens or with their own personal passion. That's not to say they don't expect a return that will more than compensate for the risk. Am I mistaken in this belief? Maybe I am splitting hairs here but I am happy to be corrected. I also agree that I am using freely the term "angel investor" and "rich person" interchangeably.

You are right in your assessment in that basically I am looking for a loan. I am also open to offering equity but financially I would prefer the ROI is based more around a higher rate of interest than equity. In short I am flexible on what the appropriate spread should be.

I have already invested personal and some family money. I have limited access to rich friends in Thailand because I am North American. My network is stronger back home obviously but I thought it might be easier to find someone here as this is where the business is located, it is a Thai based beverage (although with exports to a number of countries) and in this way they can see my operations first hand and perhaps feel more a part of the investment. I do not think banks will provide the type of loan I need as I will be too high a risk.

I don't want to monopolize your time but any other insight you have is great appreciated. Please feel free to message me privately. Thanks again for your help.

Edited May 6, 2016 by Garrett17

[seancbk]

@vaultdweller0013. I just received the telephone number for the person in charge of SME at my bank. I will look at that path. However, a bank will want to see collateral and inventory. I do not require a lot of equipment to produce or sell my beverage nor do I have a tremendous amount of inventory. This will make me a poor candidate for a loan. It's a bit of chicken and egg. I need money to grow / create more production but to do that I need collateral to act against the loan which in my case is hard.

I do not fully agree that angel investors want ownership. That is definitely one type but I am not after venture capital / equity finance. I am looking for someone who can offer debt equity such as a line of credit. I would be willing to offer an equity percentage but I would prefer to offer a higher rate of interest on a loan to counter the risk and made the reward worthwhile.

Although you are not a startup nor looking for seed capital, you might want to consider offering a convertible note.

https://fundersclub.com/learn/convertible-notes/convertible-notes-overview/what-is-convertible-note/

[Garrett17]

Thanks Sean for the creative suggestion. I read the link you provided and subsequent links from that website. It would appear that this could be a viable option if I was seeking further investment down the road. However, I am confident I will be able to grow by reinvesting my own profits back into the business. With this in mind it would seem to me that this would not work for me. Am I correct?

[derator01]

Several posts have been hidden. Please do not discuss moderation. The OP has been modified so as to not violate forum rules. Specifically, this one:

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Asking for advice is OK. Asking for capital is not.

[humqdpf]

I have only ever heard the term 'Angel Investor' used in relation to theatre productions (especially in London where they are known simply as "angels") or some humanitarian projects (e.g. social enterprises) - these are investors who invest because they have a particular commitment to something cultural or humanitarian. If they get their money back, they invest again. If they make a profit, thats great and they can put that into another pet project. Invariably such investors are so rich that losing their angel investments does not affect them.

I don't think that your project is appropriate for such an investment. What you are looking for is an investor who would typically get a shareholding or a straightforward loan. For a shareholder, what you need to do is to value your business and decide what percentage shareholding you are willing to give up and at what price. In the case of a loan, you can try a bank or go for crowd funding.

[mike324]

I have only ever heard the term 'Angel Investor' used in relation to theatre productions (especially in London where they are known simply as "angels") or some humanitarian projects (e.g. social enterprises) - these are investors who invest because they have a particular commitment to something cultural or humanitarian. If they get their money back, they invest again. If they make a profit, thats great and they can put that into another pet project. Invariably such investors are so rich that losing their angel investments does not affect them.

I don't think that your project is appropriate for such an investment. What you are looking for is an investor who would typically get a shareholding or a straightforward loan. For a shareholder, what you need to do is to value your business and decide what percentage shareholding you are willing to give up and at what price. In the case of a loan, you can try a bank or go for crowd funding.

Perhaps you haven't been keeping up with tech news in the past 10-20 years? The term angel investor is used widely in the tech industry and start up companies.

[Garrett17]

Hi:

Just to clarify, save time on replies and keep the discussion on track: I am not looking for an investor or on the merit of my investment. I merely want to hear from people who have worked with an angel investor to see what the experience was like or even if you own your own business (ideally Food and Beverage) what were the challenges you faced in raising money and how was it overcome? Is there an organized yet informal group of entrepreneurs who get together to discuss general business problems?

By all means if people have suggestions on finance vehicles (type of loans e.g. line of credit, private loan, crowdfunding etc) that could be a good option for a small business IN GENERAL that would be nice to hear but again, I am only trying to educate myself as I go through my own process to assess my own company valuation etc. It is not my desire to attract an investment through this forum.

Thanks!

[Esterhazy]

Hi,

I'm a new member with no post history, but I'd like to offer what I can. I am from New York, and have expertise in fundraising, investments, and private equity--including early stage investments which are generally called "angel investing" or "venture capital."

What you are actually asking for is a kind of bridge or expansion loan, which is not appropriate for angel investment. Typically, angel investors want to make huge returns for their investment, since early-stage investment comes with extremely high risks (they want to be compensated for the additional risk), and it sounds like you want to minimize how much you have to pay for the financing you want to receive. You typically get a loan like this from a bank, although you might find a rich friend (or two) who could be interested--these two are really your only options unless you're willing to offer equity in your business, in which case you can start talking to rich people (who aren't your friends) and pitch them the opportunity.

To give you an example, a friend of mine started a company to provide bespoke private jet flights from LA to London. He needed $1,000,000 USD to get it off the ground, but since the business would make money despite limited growth, he networked for three months and found two guys to come in as partners and provide the capital. This was not an angel investment per se, but really a "friends and family" investment, since the partners wanted to do business with my friend, instead of seeking to own a part of a private jet charter. They took 40% equity in exchange for the capital, but they opened their rolodex to my friend and made sure the first 12 months of flights were booked solid by promoting the new venture to their network.

This is how an angel or high-net-worth friend investment in your business would sound like. When you're offering a high-yield debt instrument so you can expand your current operations, well that's just a fancy way of saying bank loan.

Hope that helps.

Hi Ester(?). Thanks for your insight. New to the site (I am too) or not, I appreciate it either way.

It has been my impression that there is a difference between Venture Capital and an Angel Investor. The former wants equity and looks to invest larger sums of money while the latter can be that but may also we willing to offer debt equity (loan, LOC etc) because they believe in the owner of the business, see the potential, are willing to invest a smaller sum and perhaps are looking at the investment with a social lens or with their own personal passion. That's not to say they don't expect a return that will more than compensate for the risk. Am I mistaken in this belief? Maybe I am splitting hairs here but I am happy to be corrected. I also agree that I am using freely the term "angel investor" and "rich person" interchangeably.

You are right in your assessment in that basically I am looking for a loan. I am also open to offering equity but financially I would prefer the ROI is based more around a higher rate of interest than equity. In short I am flexible on what the appropriate spread should be.

I have already invested personal and some family money. I have limited access to rich friends in Thailand because I am North American. My network is stronger back home obviously but I thought it might be easier to find someone here as this is where the business is located, it is a Thai based beverage (although with exports to a number of countries) and in this way they can see my operations first hand and perhaps feel more a part of the investment. I do not think banks will provide the type of loan I need as I will be too high a risk.

I don't want to monopolize your time but any other insight you have is great appreciated. Please feel free to message me privately. Thanks again for your help.

Hi again,

An angel investor typically comes in early during a business' growth cycle. They would (typically) provide pre-seed, seed, or even a series A round. Venture financing typically looks for high-growth businesses--something that would return 10x or even 100x their investment. Angel investors look for the same thing.

All investors want rights. They want the ability to add value to the business in case things aren't working right. Generally, no sensible investor wants to invest only money--they want to add value in addition to capital. Investors generally take the view that the world is full of money, that so many people have so much money that being wealthy is not interesting. Hence, they want to be part of interesting ideas or interesting movements. This is why they like funding new businesses. Sure, they love the money-making aspect of it too, but everyone wants status. And if all your friends are super rich, then you need something different to talk about, something removed from what you can buy with money.

Good investments too tend to ask for more than just money. For a beverage business, you might take on an investor that built his own beverage business and took an exit at some point, and wants to invest in your business because he thinks it's exciting and wants to tell his friends about you ("open his rolodex"). If your business isn't exciting, you're probably not going to find an investor--only because there are lots of exciting ideas out there.

For a bank loan, you typically have to show that you have something that pretty much guarantees repayment. So, say you're producing 1,000,000 units now and have a contract for 12,000,000 units and need a bridge so you can fulfill the contract--a bank would definitely fund something like that. Basically, you have to show you have a mind and talent for serious business.

If this absolutely doesn't help you, you can try some kind of crowdfunding, like Lending Club, or some other means that the many kind people here have offered. My feeling, however, is that this is the kind of deal that a rich friend would take on, if anything.

Hope that helps.

[1FinickyOne]

Sorry, I am a bit late to this topic...

You seem to have rcvd some very good advice.... my experience in USA was a friend recommending a small company that was earning him 13% per year on his money. They had an active and easy to follow business plan with your personal investment easy to track in a partnership type plan. They had a several year track record of profitability.

My accountant advised me that 18% was the going rate for venture capital at that time. The one angel investor I know is more into tech start-ups and companies within his field of expertise - I am sure he uses his business acumen to control certain aspects of the business...

Unless you have proven profitability or at least can provide some security, I don't think a bank will be interested. I was a small business owner and when I needed them, they had no interest until I didn't need them anymore... from my experience they are not big on taking risks...

[syke1912]

If you only need 2,000,000 THB, do a reverse mortgage on any property you own to extract any equity..

The legal fees, and time wasted doing due dilgence is not worth it for such a little amount.

[fletchsmile]

OP,

Just a few things, as I've worked in roles on both sides of the fence: trying to get financing as a CFO as well as for institutions that provide finance (although I myself don't sell products and never have done).

- You probably need to do some more research and reading to understand and better describe what you want. Otherwise you don't make yourself clear as to what you're looking for, and it also creates a negative perception that you don't really know what you're doing.

e.g.

> you talk of "debt equity". I think what you mean is "debt" or "debt capital", as you talk of not wanting to give up control.

> angel investing is usually at an early stage/ for start ups and usually in exchange for some form of ownership, often equity/ equity capital (i.e shares)

> there are "hybrid" types of finance between the two categories though, but from what you say that doesn't sound what you're looking for. "convertible debt" is possible, and although this starts off as debt, it is convertible to equity at a later stage, so again likely to give up some form of control.

> BTW it's fine to say you're "looking for funding", but "don't want to give up control". Someone experienced in finance will then tell you the types of funding available they will offer to achieve that

You don't have to use jargon, but if you're going to, then get it right.

- Banks will lend without collateral. All Thai banks offer "unsecured loans". These focus on your ability to repay, your history etc, and by nature unsecured means no collateral

The downside is you'll be looking at high teens as a loan rate, because you're offering no collateral. But this reflects the risk to the banks

- One way or another you will be paying quite heavily if you don't have collateral. Equity investors, venture capital investors, etc will want some form of control. That's how they get their return. If you can get debt capital or debt financing off private firms that accept not to have some form of control it will be expensive. If you can't get a back loan why should they lend to you? Particularly if you won't give some form of ownership/ control.

>BTW some banks still have venture capital style investments on their books.

- In Thailand there aren't as many legitimate alternatives to banks available to you like there might be in other countries. So as mentioned above you may need to look outside if you're looking for wider alternatives. For Thailand it's more about personal contacts (and banks), than having a wide range of financing options from a multitude of different finance institutions.

- Successes we had were generally based on the relationships we had, and knowing people. So family and friends, connections etc are important. They may not want to invest personally but may be able to connect you who might be interested. So start letting people you know and trust that you're looking for this. Use your network.

- I'm really not a fan of lawyers, but please make sure you get one to write this up properly for you if you do find the right people to lend. Also articulate to your lawyer what you want - sounds like some form of funding but not giving up control - to make sure any product offered to you matches you're needs.

Cheers

Fletch

[Garrett17]

Hi Fletch:

Thanks for the feedback. I meant to say debt financing as opposed to debt equity. I was open to a combination of the two but as you correctly point out I did/do not want to give up control. I mentioned before on here that I am open to offering an equity stake. I was not aware about the "unsecured" loans option. I will speak to my bank manager about this should it be needed.

I came onto this site not asking for funding but to explore options because of lack of experience/ignorance when it comes to raising capital. It is precisely because I was unsure of what I wanted that I wrote. Had I known what I needed I wouldn't be here.

I have managed since this first post to obtain some financing through personal connections and so the need to go through this process is not as urgent. It may happen where I need to go down this path down the road but for now I am fine. The feedback however has been helpful.

Thanks!

Garrett

Edited May 16, 2016 by Garrett17

[vaultdweller0013]

Hi Fletch:

Thanks for the feedback. I meant to say debt financing as opposed to debt equity. I was open to a combination of the two but as you correctly point out I did/do not want to give up control. I mentioned before on here that I am open to offering an equity stake. I was not aware about the "unsecured" loans option. I will speak to my bank manager about this should it be needed.

I came onto this site not asking for funding but to explore options because of lack of experience/ignorance when it comes to raising capital. It is precisely because I was unsure of what I wanted that I wrote. Had I known what I needed I wouldn't be here.

I have managed since this first post to obtain some financing through personal connections and so the need to go through this process is not as urgent. It may happen where I need to go down this path down the road but for now I am fine. The feedback however has been helpful.

Thanks!

Garrett

Even so, you may want to see if you can get some small loan in the name of the business, say, an overdraft line of credit, that should cost much if you don't use it. You may need to do some legwork to multiple banks, but many are looking to expand their SME portfolios.

The credit bureau in Thailand tracks corporations (juristic persons). Getting credit now, when you don't need it, may help getting a larger line when you do need it because you will have established a history of managing credit for your business with the bureau, and the banks do look at this for SMEs (for larger businesses, the bureau is less relevant and they focus more.on P&L numbers).

[davejones76]

I may be late to this post. What might be an additional option as you have a food and beverage business there are many Thai entrepreneurs in a similar business who are looking for new brands. They pay you a fee for the product or do have extra business interest in investing into your business with a ROI.