Facts about Angel Investors
What do you know about angel investors? These investors are interested in funding new or small businesses, including offering funds for startups.
Angel investors have extra cash and want to invest for a higher rate of return. Angel investment is an equity financing business that helps businesses to grow successfully.
Typical Sources of Angel Investors
You do not have to look far for these angel investors. They can be found in the following places:
Family and friends
They can be your family or friends that are ready to offer their money for a slice of your business. However, when a business goes down, this could be a strain on your relationship with them.
You have to be upfront about what to expect in business and let them know what they may experience when they invest in your business.
Wealthy individuals
Angel investors can be in the form of successful people such as lawyers, doctors, or politicians. These people can invest up to $500,000 in your business for a return for equity.
Businesses are connected to this type of investor by word of mouth. You can meet them in associations, or through meetings.
Groups
Today, we have angels working as a syndicate, which is a group of investors who want to raise funds for businesses. These investors contribute money to a professional syndicate.
They do not handle the funding because they have a team that manages their money for them, and ensure that funds are used for profit ventures.
Crowdfunding
Crowdfunding is another form of angel investors. This happens when a large number of people online to help a business raise funds. Individuals can fund as small as $50.
Communicate Before Using Angel Investors
You do not jump into this type of business funding without doing research. You should know what you are getting into with the investors you chose.
While the investor brings money, what other thing are you expecting from such a person? Conflicting areas should be handled before you start with them.
The future of your business has more to do with these angel investors. If things go awry in the future, it can collapse your business.
That means you should understand what the investors are offering and what they want from your business.
Come up with a comprehensive business plan to help you with your relationships with angel investors. Before you approach these business angels, you have to check the type of funding they are offering.
Advantages of angel investors financing
Angel investors can make investment decisions fast. That can be an added advantage to your business, especially if you have an emergency for funding.
- You do not require to provide personal assets or collateral.
- Businesses enjoy investor knowledge and contacts. You can join networks that would help your business with their support.
- Angel investment help in installing discipline to you as a business owner due to outside scrutiny.
- Businesses enjoy mentoring or management skills from their investors.
- Businesses do not have to pay repayments or interest.
While angel investors have huge pros, they still come with drawbacks. Here are some of the cons you should know about this investment.
Disadvantages of angel investors financing
- Angel investments are not suitable for businesses below £5,000 or more than £150,000
- The process of finding these investors may take longer than you think.
- Business owners have to give up a share of their business.
- The financing comes with less structural support available from an investor.
These facts can help you understand angel investors better. You must not rush into accepting every fund from these investors. You should only make use of investors who have your business at heart.
