Terry Cross: Approaching Angel Investors

By Bud on November 6, 2008 TrackBacks (0) Comments (14)

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Terry Cross has 46 years experience as an angel investor. In this segment, he describes the general process for contacting angel investors, negotiating with them, and the type of terms you can expect amidst the credit crisis of 2008...

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Filed under: Angel Investing | Detroit, MI | Financing Innovation | Terry Cross

Terry summarizes the steps to accessing angel investment as follows:

  • Initially, you should approach an angel group because that is one of the easier way to find individual angle investors.
  • Provided you make it through the screening committee, you then do a 20 minute presentation followed by question and answer.
  • Then the waiting game begins. If one or more investors takes interest, a series of meetings to explore the investment opportunity and perform due diligence will occur.
  • Finally, if that process completes successfully, the investors and entrepreneurs will discuss terms. Currently, in the midst of the 2008 financial crisis in Michigan, entrepreneurs can expect to give up 30–40% ownership for investment on the order of $1M to $1.5M.

Angel groups we are aware of in Michigan include:

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14 Comments

Gewdton on November 9, 2008 4:00 AM
Good video on investing. Especially when considering the ecomonic hasn't improve much in these last few months...
Karina Vaks on November 13, 2008 7:39 PM
A very informative interview on investing with an angel. There are a few angel groups in Michigan and unless you know someone in them they are very hard to get in. The process of steps includes finding a group, submitting your business plan to the screening committee, and if you pass the committee the entrepreneur must present to the group. I find it interesting that many times only one angel is interested in any given business idea. I guess this is a good considering an owner will give up a significant stake in their company if they team up with an angel investor. This method of raising capital has been used by companies such as Bell Telephone, Google, Apple Computer and Starbucks. It is very popular when the necessary capital requirements are below $2 million. After $2 million there is not enough ownership rights available to make it worth while to an angel investor.
Jane Ansara on November 14, 2008 9:07 PM
This interview on angel investors is very significant and can help people who are interested in this field. For ones that may not know who are angel investors, they are wealthy individuals, often entrepreneurs themselves who invest in business start-up in exchange for equity stakes in the companies. Today, angel capital is the largest source of outside funding for companies in the start-up phases. They typically offer expertise, experience and contacts in addition to the money. Angel investors generally want less domination of your company and a gradual profit on investment; however the criteria for investment are likely to be similar. Angel investor groups are great sources of private capital and frequently invest angel money into new companies; according to Terry Cross, Ann Arbor Angels and Great Lakes Angels are good ones to go through. He mentioned that it could take up to 45 minutes to present to these types of groups. After the angel presentation, it is a good idea to get people to share the investment but there can sometimes end up only being one. The economic crisis has actually been a little easier on angel investors because companies are willing to give up at least 30 to 40 percent of their equity for the money. The tough economic climate is pushing valuations down, which means angels can get more of a company for less money. I thought this economic crisis we have encountered would hurt all angles of investments, but it is refreshing to know that certain people are benefitting from the situation and helping others too. Jane Ansara
Amy Suich on November 16, 2008 5:06 PM
In my opinion, Angel investors are truly "angels" to individuals that are looking to start up a business, but lack the capital to do so. Angels are defined as, wealthy individuals who invest in business start-ups in exchange for equal stakes in the company. These angels may invest because they have a personal interest in the product or business, or have experiences in the industry. Angels are great to go to for funding once you have borrowed or receive you're maximum amount from friends and family, and are an ideal source for businesses with start-up costs in the $10,000 to $2,000,000 range. Even though the route to receive funding from angels may be a long one, with presentations and playing the waiting game, it can prove to be worth the time. The Angels need to make sure that what they are investing in, is going to be worth it. A few examples of million dollar companies that have relied on angels funding in their start-up times include, Google, Apple, Starbucks, and Kinko's. These are names that everyone has heard of, and have really benefited from Angel's investments. Amy Suich
Cerynthia Edwards on November 17, 2008 2:19 PM
Angel investors are wealthy individuals who are often entrepreneurs themselves. They invest in businesses startups in exchange for equity in the company. A lot of angel investors invest in a business not solely for the equity but for personal interests or experience in the business. This type of investor is ideal for small business who still don’t have enough money after the owner or entrepreneur has invested their own money but don’t need a large amount of money. Mr. Cross gives tips on the best and most effective way to approach an angel investor and actually receive the assistance the entrepreneur is requesting. Having 46 years of experience as an angel investor, Mr. Terry Cross seems to know a great deal about the process of angel investing and the do’s and don’ts of the process. He outline the best option is to approach an angel groups for example Ann Arbor Angels in Ann Arbor, Grand Angels in Grand Rapids or Great Lakes Angels in Rochester, MI. The next step would be to give a approximate 20 minute but no longer than 45 minute presentation that will include a question and answer session at the end. Then the waiting time begins where a series of meeting will more than likely take place to explore investment opportunities and last but not least the completion of the process brings a discussion of the terms.
Alan E. Bradford on November 17, 2008 2:53 PM
Angel investor is a well-groomed business innovation. It seems like a modern loan shark that is legal or a charity group that wants their cut of the pie. The interview was very informative and Terry Cross was very accommodating with the Angel investor information. It also seems that it might be hard to find an Angel investor not a less you know someone. I personally never heard of Angel investors. They do not seem to have any marketing departments. The reason I mention this is because Terry says that the only way you can get a hold of an Angel is word of a mouth. Another thing that gets me is that an Angel investor is not that pressed on a full business plan. This might, because they will donate 1 million to 1.5 million but expect 30% to 40% in a state that is in a major recession. I would like to know have Angel investors branched to any other states in America. Also what if there is more then one Angel investor interested in the business venture, what would be the percentage of stock that would be taken out.
Jessica Cook on November 17, 2008 10:17 PM
I found it amazing that angels investing is such a different investing firms than most. They operate as almost like a sercret socity that only uses word of mouth as a way to market themselves. The other interesting thing about them is that they dont seem to seek out clients but they wait for the clients to find them. I felt Terry Cross what every open and honest about the questions asked of him the inteview what informational.
Nyangel ONeal on November 17, 2008 10:51 PM
Hello my name is NyAngel O’Neal and I’m a student at Eastern Michigan University and this semester I’m enrolled in an entrepreneur class. This semester we are learning about different businesses and entrepreneur. I was able to watch the interview with Terry Cross discusses Angel Investing. He stated that the only ways to find out about his business is from word of mouth or from an Angel Associate. One question I would ask Terry is if you don’t know an Angel Investor how can you get in contact with one. He stated in the interview that that have a group in Ann Arbor and the Great Lake Angel. They are located in some other area in Michigan. The Angel invertors will meet with prospect to go over there financial needs or look at their Business Plan and some how help them invest. This company has being around for some years but I haven’t heard much about them. In the interview he talked about the 20 minutes presentation that they give. The only I didn’t understand is why is the Angel Investors so private. I think it would be nice if other people have an option to invest with Angel Investors. I would like to learn more about the company and how they pick there investors.
Laurin Puente on November 17, 2008 11:05 PM
This was a very informative interview. The Angels Investing seems to be somewhat elite especially since I had never even heard of this investment group before. They do not seem to be very well known since Terry Cross mentioned that the only way of getting a hold of an Angel Investor is by knowing someone else that knows about Angel Investing. Terry Cross was very honest about Angel Investing, he was very forthcoming with information. Angels Investing seems to have a very simple concept; an entrepreneur has to give a 20 minute presentation and basically try to sell the investors on their business idea. I think Angels Investing could greatly benefit a lot of new entrepreneurs start out their new business.
Brock Tobias on November 18, 2008 1:14 AM
To start off, I had never even heard of Angel Investors. The fact that they have five locations in Michigan is pretty interesting. The fact that Mr. Cross comes out and says that they don’t advertise and that most of the people that get to pitch their ideas to Angel Investors are people who either know an investor or have heard via word of mouth, is interesting. I would think that a group like this could greatly help out someone who is just starting up their business. Angel investors are wealthy individuals who are often entrepreneurs themselves. The investors invest in business startups in exchange for equity in the company. This type of investor is a good match for small business who might not have enough money to start up their business, or an entrepreneur who has invested their own money but still need a little bit more. This can help the entrepreneur from looking to family and friends for money, which can often have very bad results, especially if the business struggles. The process seems quite simple, when you get your shot you have to make the most of it. The entrepreneur has anywhere from 20 to 45 minutes to pitch their ideas to the investors, who ask questions and decide whether they will move forward or not with it. The fact that Terry Cross has been an Angel Investor for the past 46 years shows that they are not only committed but very good at what they do. Angel Investors has help start up many successful companies in Michigan, such as; Google, Starbucks, Kinko’s, Bell Telephone, and Apple computers. If I were starting up my own business I would take a hard look at Angel Investors.
jennifer ahlers on November 18, 2008 11:35 AM
I found it informative and great to know that really anyone can present to an Angel investor. When I think of an Angel investors I think of them approaching you and offering you a deal, but it is nice to know that you can present to them and make your case. I believe however the most important factor in getting an angel to invest in your company is by networking. Although you might seek an angel out, it is important to have a good reputation. When you have a good business reputation it will make it easier for the angel to feel comfortable in investing in you. I would make sure before seeking an angel investor out that they have an interest in your company. I would think that it would be easier for someone such as an angel to invest in your company if they already had an interest in your business. This way they can invest their knowledge, money and energy into your business. I think some people get so wrapped up in finding someone to finance their business they forget that they are losing some control of their business when they seek for financial help such as angels. Like Terry said if an investor puts in around $1 million then you are giving up around 30 to 40% of your own company. Sincerely Jennifer Ahlers
Nick Downey on November 18, 2008 11:39 AM
Terry Cross's talk about Angel Investing was truly interesting. It is very interesting to me to know that these investors do not advertise, but rather they rely on word of mouth to expand and get new businesses. To further peak interest, I had no idea that companies in Michigan such as Google, Starbucks, Kinko's, and Apple were all helped by Angel Investors upon start-up. They seem to be very good at what they do, and would have to be, considering that they don't advertise to draw in companies. And who new that they were right here in Ann Arbor. Heck, I didn't even know who they were, much less that they were this close to home.
Dariusz Seklecki on November 18, 2008 12:29 PM
Before watching terry cross in this video, I never heard of angel investors. It's a very interesting concept. My question is why are angel investors so secretive in the way they work. It's interesting how they rely on word of mouth to get new businesses. Angel investors are themselves entrepreneurs and take big risks sometimes. They invest in startup businesses and in return want a percentage of the equity of the business. I don't know what criteria do they use to pick the businesses they want to sponsor and why are they not advertising. They may be missing some good new businesses. It's interesting to know that they are also in our area.
Stephen Stortz III on November 18, 2008 5:24 PM
Terry Cross gave an excellent description and summery on what an angel investor is, while describing the general concepts of how processes work inside angel investor groups. The groups mentioned in the interview were Ann Arbor Angels or Great Lakes Angels. Anyone who is looking to seek out an angel investor should check out those two investment groups. The information that caught me by surprise from the interview was how difficult it is to approach angel investors. Terry mentioned that basically you have to be family or very close friends with an angel for them to take any interest in your case. All and all I found this interview very helpful and would consider approaching an angel investor group if I need to raise capital for my business.

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