What are angel investors? Do you want to know? Well to cut right to the chase, angel investors are persons who invest in businesses usually new or startups. These investors provide the capital needed to begin or expand a said business.
These individuals are those who typically have the necessary funds in place and are willing to spare or spend as long as they get higher rates of return in your business.
Must Read: Crowdfunding – How Crowdfunding Works | Types of Crowdfunding
Angel investing is a form of investment that only a few know about. It’s not that it’s new or anything, it’s just that they just fail to realize that it is there. Normally when a person wants financing for a business, big or small. He or she immediately thinks about a loan or a financial institution. Angel investments have been around for a long time, maybe even longer than loan platforms.
This is a form of equity financing. This form of investment is where the investor supplies the required funds in exchange for a position in the company or business. This form of investment is usually used by small businesses.
And non-established businesses that don’t have the needed funds and finances or collateral to secure a loan. These investors, therefore, fill in the gap between small businesses and financial institutions that should have provided financing.
Advantages and Disadvantages of Angel Investors
This form of investment has its advantages and disadvantages. Personally, I think that that the advantages of these investors are more than the disadvantages. The basic advantage of this type of investment is that it is less risky than debt financing.
With this form of investment, the invested capital does not need to be paid back in the event that the business fails. An angel investor is only looking for a personal opportunity to invest. And so he is, therefore, looking at a long-term opportunity.
The disadvantage of this feature or means of investment is that most owners may lose a part-control of their businesses. An angel investor will also have a profit should in case the business is sold in the future.
Lending institutions in this situation have no share of the profits just in case it is sold and also have no business in how your business is run. Angel investors will also have a say in how the business is run.
Source of Angel Investors
Angel investors are more like a general term. Anybody can be an angel investor, truth be told. These types of investors usually come from family and friends. They can also come from wealthy individuals in society.
A wealthy individual here can either be a doctor. Or a lawyer, a politician who has a high net worth and is willing to invest. Another source of angel investors is groups and crowdfunding platforms. Crowdfunding is a very effective means or source of angel investing and you should probably try it out.
Before including an angel investor in your business, you should think it through. You should be very clear about your position in the firm. And also what the investor is bringing to the table. You should create a relationship between you and the investor. So as not to get conflicting ideas on how the business should be run and operated.