The investment made by a private individual, with high net worth and business experience for a new business is known as Angel investment. Such an investor is called an Angel Investor. An angel investor directly invests part of their capital in a new and growing unquoted business. Capital funding for a start-up business is usually provided by an angel investor, as an exchange to convertible debt or ownership equity. Start-up businesses need angel investors the most as they might not be supported by many investors in the initial stages.
The Angel investors are not venture-capitalists. They essentially differ in the ownership of the money that they use to invest. Angel investors always use their own money for investment as they are usually affluent. But Venture Capitalists do not invest their own money in companies. Also, they will not be able to accommodate small deals in large numbers.
The importance of angel investors also increases, as the traditional sources such as bank loans are limited keeping in mind the risks involved and other considerable costs. Angel Investors may also be called as angel funders, business angels, informal investors or private investors.
Angel investors could either be an individual investor or the investment can also be made in syndicates. In such cases, one of the angels in the syndicate will take the lead role. Apart from capital funding, angel investors also provide management experiences, required skill sets and many contacts that the entrepreneur would need. Good angel investors are said to provide Smart and Patient Capital.
Angel Investors do play a very important role in the economy of a country. In many countries, angel investors constitute the largest source of external funding for ventures that are newly established. They provide risk capital and greatly contribute to the growth of the economy and the related advances in technology.
Spreading awareness about angel investors’ activities and policies not only increases the likelihood of new ventures to survive but also could have a significant effect on an entrepreneurial economy.
Here are a few points to keep in mind that help persuade an angel investor for a company’s capital funding.
– The growth potential of the company is one of the key factors. If the company promises 5 to 10 times growth, angels are sure to get attracted.
– Have unique ideas and a proven good team to execute those ideas.
– Connect with other entrepreneurs to know what their investors expect and how they got them to invest.
– Being around accelerators is also one of the great ways to attract angel investors.
– Learn more about the angel you want to associate with. They need to invest, the sector they are interested in investing with, etc.
– Have a thorough knowledge of the industry you are serving. Investors would want to have a clear picture of your business plan and strategies to overcome hurdles in the industry.
– Always be realistic. Never overestimate the business’s worth. Let the valuations be based on measurable parameters.
– Prepare a transparent financial statement that includes legal structure, ownership and outstanding debts of the company.
Most of the Angel Investors themselves may be entrepreneurs. They surely will have valuable advice after going through ups and downs of managing their own business. They become investors to give back. Thus angel investment helps and encourages young entrepreneurs and supports them in their path ahead and also contributes to a great extent to the economy of the country they are a part of.
The investment made by a private individual, with high net worth and...
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