What is an angel Investor?
Before we move further let’s understand the Angel investors definition Angel Investors are mainly high net worth individuals or groups of individuals who invest in start-ups usually in exchange for an equity stake.
Angel investors are commonly known as seed investors, angel funders, or private investors. These affluntial investors generally provide financial funding to start-ups at the initial stage where the risks of the start-ups failing are relatively high.
For example Alexis Kerry Ohanian the American entrepreneur, Anupam Mittal the founder & CEO of People Group, Rajan Anandan the managing Director of Sequoia Capital, Dr. Ritesh Malik a leading angel investor. These were some highly potential angel Investor and entrepreneurs who can lay a strong foundation to start ups.
Angel Investors qualification:
Well, there is no such requirement for a person to become an investor. The seed funders or angel investors like business, engineering, accounting or finance. They are highly experienced individuals who know about the business, equity investments, entrepreneurial world, finance, startups and risk management.
How does the Angel Investment Process work?
A investor foresees the future growth and potential of a business by firmly relying on the innovative idea or product. They take the risk and bet on the business founder’s commitment and dedication. The financial viability is also checked by going through the firms records.
The investor’s team check the necessary details of the founders, executives as well as the corporate team. After the investor is convinced then comes the legal procedure.
The legal contracts and fair valuation, viability along with clarity is needed for strong foundation of the business relationship.
How to find Angel Investor?
Let’s understand how we can find angel investors for the start-ups. If you are someone who is looking for a right investor or funding then here we are with the right information regarding angel investors and venture capital funds.
Among the two types of angel investors, the affiliated funders are mainly the funding one gets from highly rich friends, relatives and family members and these are the closest sources of angel funding and easily accessible than the non-affiliated investors. Non-affiliated funders are quite difficult to search as they are not linked to the start-up or the owners.
If you know the right way to find an investor for your business then there are few ways by which you can easily attract the right investor.
Firstly, you can take help from lawyers, investment bankers, accountants and any other professional contacts who are in connection with potential investors.
The next way is to search an investment funder from various websites, other online networks, and groups like Sand Hill Angels and Investors’ Circle in the US where it lists down the angel investor’s details. These platforms help bridge the gap between investors and entrepreneurs as they hold a network of angel investors.
Then there comes a difficult yet beneficial way, many news channel platforms often show articles on top angel funders around the globe. If you are lucky enough to get a chance to deal with them then nothing is better than that.
Advantages of angel investors :
Angel Investors are always preferable as there are less obligations and formalities.
A loan can cause a lot of headache. Unlike other type of funding there is no need to pay back the money taken for the business from an angel investor as the business owners give a stake equity in exchange for financing.
Lets dive into the benefits of angel investors:
- They add credibility to a startup, the name of such powerful people being attached to the business can lead to successful businesses.
- A startup business can get an experienced investor as the angel investors are like angels and highly experienced. This has a long-term impact. Various data and research suggest that angel investors’ supported startups are more likely to grow and be successful.
- They can provide contacts of potential employees as well as clients.
- These type of investors are risk takers they do not step back from risky start ups, if they find there is a scope of scalable business from your start-up. Although they wish for a significant amount return to balance the level of risk they take by investing.
- They can give access to professionals like investment bankers, accountants and other professionals.
- The investors help in boosting the strategies to lead the competitive market.
- The most advantageous thing about angel fund is it brings lots of valuable insights for the business.
Disadvantages of angel investors:
Loosing a portion of equity stake- as you take money from angel investor you loose a part of your net earnings. You cannot own your business completely if you receive funding. Thus, it is advisable to negotiate wisely and set the limits of the investment before taking the funding.
Sharing business control- you will need to loose total control from your start-up as they own an equity stake in your business. You cannot avoid them, there will be interference in important decisions.
Creation of Pressure- the owners of the business receiving funds need to perform better. They do not take the money back but expect the business to provide high return of their investment. For that the start-ups need to perform and grow.
Obligation- Officially the start-ups are not obligated to repay back but there will be always so strings attached but since you give them a equity stake of your business as a proposal for the fund. There will be some responsibilities too, like you give the a share of your net earnings and obligation to give the investors vital information regarding the start-ups and its progress.
Thus, This article intended to provide a brief insight about angel funding and this was everything regarding the angel investors.