Angel investors are people who invest money into a start-up or growing business. This means that they will receive equity shares within those particular companies. If a company ever gets to a certain amount revenue or is eventually sold, the angel investor gets an amount of the profits that were agreed upon at the start of the relationship. They will usually invest anywhere from five thousand to a half a million dollars. This investment will generally take place at the very beginning of the company’s origination.
As a result, angel investors take on more risk than venture capitalists because venture capitalists tend to invest in companies during the later stages of development. This is usually after the company has proven its ability to become successful.
For investors, new companies are considered to be a larger risk than established companies. This is where the term “angel” comes from, in relation to investments.
Angels invest money in companies for 4 general reasons. First, they might have a personal bond with the owner. Secondly, they might believe the mission statement of the company. Third, they like the rush that comes along with investing money. And last, they like the money that they get back from their investment. Do not think that an angel investor is a charity. But then again, there are some angel investors that do not invest their money for profit.
Personal Bond with the Owner
Angel investors are frequently associated with the owners of the companies that they invest in. The investor might be a friend, family member, associate or even a co-worker. This is why it is very important for entrepreneurs and business owners to create and work on relationships with all of their important personal contacts.
Believe in the Company’s Mission Statement
Angel investors put money into the companies that they believe in. For instance, if the CEO of Acme Widgets proves to an angel investor that his company’s product can make life better or totally change the way that ordinary products within this market are distributed, then that angel will be more apt to help develop the company from the very beginning. Most of the time, Angels like to know that they are one of the first to be a part of a unique opportunity.
The Rush of Investing Capital
Investors love the idea and thrill of finding a new company, giving them money, leading them to success and getting a part of the credit and revenue once the company becomes successful.
Return on Investment
Just because they have idealistic personalities and adrenaline rushes does not mean that they don’t want to receive a return on their investment. Quite frankly, the investors who get in on the ground floor are usually the ones who get the most return when the parent company becomes very successful.
When you look for business funding, write your business plan and present it to potential angel investors, do not forget the four points that were described in this article. Being aware of the psychology and intentions of angel investors can make a big difference when it comes to a wonderful plan that never sees the light of day and a wonderful company that becomes successful.