When asking

[freedom.project]

When asking for investment capital from Angel Investors, are they looking for you to also put up capital. And if the answer is yes, then what do you do if you don't have anything to invest but you sweat and blood.

[akula]

sure..there's an answer to your question, but to understand the answer, it helps to put equity finance into perspective (i.e. distinguish it from debt finance).

1. Equity finance is expansion capital. It's only appropriate when the entrepreneur has already made some sort of an investment to create some sort of assets on the balance sheet. It's not appropriate to close equity finance agreements when there is no company registered and nothing exists on the financial statements - which is why this never gets done (save some exceptions, which relate to trust theory.)

2. In other words, prior to seeking equity capital, the entrepreneur will typically deploy their own savings and capital from loans to create some of value on their balance sheet. Most of the time, this is either some kind r&d, technology assets, or contracts for future delivery and customer prepayments.

3. To answer your question: Yes, it is not unreasonable to close an equity finance deal with your angel PROVIDED THAT you have some sort of traction on the company's books. This can include contractual agreements, LOIs from other investors, or tangible things like technology (often, none of these assets will require a cash expense for the asset to be controlled).

Now..if you don't have either the customer research surveys, contracts for delivery, LOIs from other financiers, employment contracts with some industry superstars, or working technology prototypes and intellectual property - then, equity is not appropriate.

In this instance, when you're at point dot, ask your business angel for debt (i.e. a loan), including convertible notes.

Is this making sense?

[freedom.project]

It kinda does. So, I need to create some sort of Asset on my balance sheet to ask for any kind of capital.

[akula]

yes, that's right. you have to have something to offer.

look, we'll do it like this - I don't have any patience for discussing these things with someone who hasn't shown any commitment to seriously learning about the capital raising proces

read Close Any Deal: A. David Silver's 6-Step Formula for Success

It is by far the best book on the market about closing deals (and I've read all of them). The author is extraordinary, it's approachable, and it will teach you everything you need to know.

tell me which chapters impressed you the most, and we can discuss these things in more detail

[freedom.project]

Great. I'll go pick it up today when I go into town.