What Is Angel Investment

by megan rose in Business on 23rd January 2016

Angel investors fund in small startups or businesspeople. Often, angel investors are between an entrepreneur’s group and friends. This kind of investors to help the business people by providing the one-time investment. it leads to an ongoing dose of money to encourage and lead the business through its critical early stages.

The angel investors are nothing but informal investors, private investors, angel funders or business angels. The angel investors can transaction for the ownership equity. A few angel investors invest through crowdfunding platforms online.

The term angel investor

The term angel investor derived from the word Broadway theater when affluent individuals provided money to impel theatrical products.  This term firstly used by the University of New Hampshire’s- William Wetzel, he is the author of the Center for Venture Research. He has completed a research on how business people gathered capital.

How can be become an angel, investors?

The angel investors should meet the (SEC) Securities Exchange Commission’s criteria for approved investors. An individual can become an angel investor, who can have a minimum net worth of $1million and also an annual revenue of $200,000.

Ways of investing

The angel investors mostly use their self-capital, another source is the venture investors who take care of pooled fund from several other investors and put them in a strategically directed fund. The angel investors generally represent individuals, the object that actually gives the fund may be an investment fund, a business, a trust or, limited liability company (LLC), among several other varieties of vehicles.

Benefits of angel investors

If a business has great potential but inadequate funding, the angel investors can provide the fuel for dramatic growth. Here there are a few benefits of capitalizing their business within angel investors.

Availability of funding

Angels will often move in where additional investors freeze to step. They’re viewing to “become in on the territory floor” with the strong companies of tomorrow, and are suitable for receiving risks that other investors might not require to.

For example, Mike Markkula has invested $250,000 in Apple Computer back in 1977, while the organization was in a baby stage and had hardly sold a few hundred systems. Another funding paths would not have been accessible to such a growing company. In return for Markkula money, The Markkula got control of one-third of the business and became its third agent. The main advantage of angels is that they might be ready to secure funding from them when venture capital, banks and private equity firms won’t touch them.

Adaptability

The angel investors are more adaptable, funding anything from a thousand dollars to some million. The banks and funding firms often have pretty strict criteria about how much capital they will provide, how great a company has to be and etc.,  Which means that the angel funding can be a viable option for a broad range of businesses, from baby stage companies with much greater goals.

Expertise and associations

In the above example, Mike Markkula didn’t just lead money to Apple. Markkula also afforded business expertise and served the company obtains the loan and venture capital funding.

There are many angel funders play a related role, carrying on their self-experience to help the businesses they fund in to succeed. They usually have a broad network of contacts, which can help them to obtain new consumers or associates.

Best achievement rate

Analysis by Harvard Business School discovered that firms funded by angel capitalists had greater endurance rates, high growth, and was moreover prepared to accomplish additional capital-raising than other industries. Another word is that not all the angel capitals workout. But the capital and the expertise giving the early years and reach the growth they are striving for.

Disadvantages of angel investors

Investors expectations

The angel investors are expecting a lot from the companies, they are taking a great risk. So this is the major disadvantage for the angel investment.

Loss of control

The investors don’t have any control over the investing business. So, they shouldn’t ask anything about the expenses. Simple they should take whatever the business people will give.

Limited funds

The business will get the simple amount of capital from the angel investors. The business doesn’t have the chance to get the great funds from the investors for approaching this kind of investors.

Conclusion

The angel investors are potential but not for all kind of business. There are both advantages and disadvantages are there. The startups also rarely prefer this kind of investment. The investors are ready but their expectations levels are very high, the startups might not reach it. So the startups have to take the step, as the same way the angel investors also fund carefully.

 

Categories: Business Finance

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