Angel investors invest their money in start-up companies in exchange for a convertible debt or equity ownership interest. They are also known as a business angel, angel funder, and private investor. Successful startups like WhatsApp and Facebook have encouraged several angel investors to make various bets with the hopes of having expected returns. Angel investors spend capital through crowd funding or organizing themselves into angel networks to pool their investment funds and also to give advice to their selected companies.
For a startup company or entrepreneur, the angel Investors are considered as the entrepreneur’s saving grace or best friend. They are called “angels” as they play the role of an answer to the entrepreneur’s prayer for money. Angels are wealthy individuals who give seed capital to the businesses in the early stage of their business’s life cycle. Their money may be contributed in exchange for equity. Spending money in the early phase of the company is quite risky, but it can also be helpful for the investors.
Rewards not only come from the financial returns, but also from undergoing the simplest form of capitalism. Private investors purchase assets or stocks when the business is private, and get the rewards with the company and then see that assets to another buyer in the stock market. This is how an angel investment works. If you are seeking an investor to start your business, you should know following things:
- Get complete information about the investor and find out if an investor or investment group is being hosted in your area.
- Ask your personal accountant, lawyer, or professional expert for information where to find associates that can manage entrepreneurial services.
- Approach businesses’ development center’s directors; maybe they are interested in investing capital in your start-up company.
- State or regional development agency can also provide you information about angel funders.
- The bank is also a reliable place to ask for angel funders.
In order to become a successful investor, it is essential that individuals understand how to know and choose opportunities for equity investing.
Being an angel investor, you should remember following things:
- Discover how the ROI will be accomplished.
- Don’t get hung up on percentages of ownership.
- Make sure other investors are investing.
- Make sure there is a solid barrier to entry for the competition.
- Ensure that you have a plenty of investment options to choose from.
Generally, the angel investors care about the quality, commitment, and honesty of the founders. The market opportunity is potential for the business to become huge.