The Meaning of Angel Investor is an individual who provides capital for a business or businesses start-up.
Usually in exchange for convertible debt or ownership equity.
Angel investors usually give support to start-ups at the initial moments.Wikipedia
They are known as “angels” because they often invest in risky, unproven business ventures for which other sources of funds.
An angel investor exchange for convertible debt or ownership equity.
The capital provided by Angel Investors may be a one-time investment.
Or it may fund money during the initial stage to support and carry the company through its early stages.
Angel investors are typically high net worth people who fund startups or early-stage businesses.
Many are accredited investors with a minimum net worth of $1 million or at least $200,000 in annual income.
Angel investments can be thousands to millions of dollars, depending on business size and ownership sold.
Who can be an angel investor?
Angel investors have often accredited investors, which is a designation that requires a minimum net worth of $1 million, at least $200,000 in annual individual income or at least $300,000 in annual joint income. People who hold a Series 7 license (a broker license), a Series 65 license (an investment advisor license) or a Series 82 license (a private securities offerings license) may also qualify.
Angel investors can be friends, family, members of your professional or social networks, individual angel investors or a team of investors.
Also, they often form “angel groups,” in which they evaluate businesses and invest together, pooling resources to make larger investments.
They typically want ownership in the company they invest in.
An angel investor usually provides capital in exchange for equity or convertible debt, which is a loan that can be converted to equity at a later date.
Advantages and Disadvantage of angel investors
Advantages of Angel Investors
Expertise. Angel investors often have industry expertise. They may be entrepreneurs who started a business in your field and can provide advice and coaching to help you succeed.
Connections. Angel investors may have a lot of industry connections. They may be able to introduce you to new customers, financing sources, business partners and other relevant contacts.
Support. Because they’re owners, angel investors typically make money only if the business is successful. This position should motivate them to help add as much value as possible.
Deep pockets. If your small business needs financing later, angel investors might make follow-up investments.
Alternatives. Angel investors might invest even if a business can’t get financing from a bank or a financial institution.
Disadvantages of Angel Investors
Potential rejection. Even if you think your company offers outstanding growth potential or a game-changing product, angel investors still might reject your pitch. After all, investing in a startup is risky.
Shared control. Some angel investors might demand a large ownership position, and you may end up selling more of the company than you had planned.
Possibly unhelpful. Do due diligence on an angel investor to ensure their interests are aligned with yours. Ask for references and, if possible, talk with other startups that raised money from this investor. You may prefer an angel investor who will be a business partner, help your company grow and contribute to its success, instead of one who’s just looking for a return on their investment.
Time and effort. You’ll likely need to prepare a lot of paperwork, such as income statements and projections, balance sheets, cash flow statements and bank statements, so be ready for a potentially lengthy, time-consuming process. Get In Touch