Starting a beverage company often begins with a dream. If you have a passion for spirits and want to share it with the world, you're on the right track. However, launching a beverage business involves significant startup costs and processes. So, how can you transition from a general idea to a concrete business plan?
Beverage angel investors can provide the initial support needed to launch your spirits company or expand into new markets.
And while they might sound like a gift from above, angel investors are actually very pragmatic and business-minded individuals that can have long-lasting effects on your business.
Is this the ideal option for securing financing for your spirits business? Let's delve deeper into understanding what a beverage angel investor entails, its impact on your business, and ways to connect with them.
There are various methods for a small business to secure the funds needed to kickstart their operations or support potential expansion. Each approach comes with its own set of advantages and disadvantages that your business will need to carefully consider.
Angel investors are individuals who are eager to provide capital to small businesses in hopes of a high return on their investment. Typically, they are individuals with a substantial amount of cash readily available. Their decision to invest is based solely on their personal discretion, unlike a bank loan which considers more concrete factors.
However, unlike a bank loan, these investments are not made with a negotiated interest rate. Angel investments are a type of equity financing. This means the investor will provide the money in exchange for an equity position in the company.
The equity of a business is the value of the company as a whole, calculated by subtracting outstanding debts from available assets.
Shares in the equity of your business essentially equates to ownership of the value of the company as a whole.
Equity financing is frequently used by businesses that don’t have anything else to leverage as collateral against a standard loan.
This places beverage angel investors in a strategic position among potential investors for small businesses. While family and friends may provide smaller loans for startup support, venture capitalists offer larger amounts for significant expansions. Angel investors, on the other hand, fall in between, ready to make a substantial investment in exchange for equity.
The first benefit of utilizing beverage angel investors is that there is a much lower amount of risk assumed in the transaction. You are going to be liable for a business loan no matter how well your business performs. Angel investments don’t need to be paid back if your business fails.
There is also no accrued interest.
Angel investors can make their decision swiftly, bypassing a lengthy approval process. This quick decision-making process injects capital into your business precisely when you need it the most.
Even though you probably already take your business very seriously, working with an angel investor can bring an added level of accountability. With someone else's investment on the line, there is a heightened sense of responsibility that can help keep you focused and moving forward.
One potential downside is that owners will need to share a portion of their business with an outside individual. This means that the angel investor will have a say in how the business is operated, as they will have a stake in the future profits, including any proceeds from a potential sale of the business.
The timeframe in which a beverage angel investor may be a good fit can be limited. It may not be worthwhile to give up a portion of your business for a small investment, and finding an investor for a larger amount can be challenging. The details can make it tricky to find the right arrangement.
Networking can be a great way to connect with angel investors. Many investors prefer to work within their local community, so getting out and meeting other business owners can be beneficial. Not only can this network lead to future partnerships, but it can also provide support in securing funding.
There are a handful of online resources to help connect investors with small businesses. Angel Capital Association, for example, is one of the largest angel investor organizations.
Those in the spirits industry can work with leaders in the industry to find appropriate sources for funding. Brindiamo Group has been facilitating connections between investors and small businesses in the spirits industry for years. Visit us today to see how we can help you get the funding you need to grow your business.