Angel Investors

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01 Nov Angel Investors

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Angel Investors

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I’m not sure who first gave these early investors their name but it certainly is a very appropriate one for they can come into a business that’s struggling to survive and give it an injection of capital and experience that will help the business establish a strong foundation to build on.

What are angel investors?
Angel investors are definitely out there on the edge when it comes to taking risks. That doesn’t mean that they will invest in just about anything because they won’t but they are far more likely to take risks with their investments than a bank would and way more likely to take risks than a venture capitalist might.

Angel investors are the people who are prepared to invest in new businesses that have just got started. They’re likely to invest in businesses that have a new and innovative product to develop and market and it’s quite likely that they are already involved in the industry that the business they are investing in is focused on.

Angel investors usually fly solo and invest anything up to $100,000 of their own money although small groups of like-minded individuals can join together to finance an investment to spread the risk. While angel investors are looking to invest in the short term they’re not quite so focused on an exit strategy as a venture capitalist might be although they are just as keen to obtain a good return on their investment as any venture capitalist or bank would be.

Pros and cons of angel investors
Obviously, an angel investor is going to want to exercise some control over the business that they have invested in but it’s a far more gentle control than most venture capitalists might exercise. Most angel investors see their role as being an advisor and their goal is to get the business up and running and to keep it focused on bringing its product to market.

Angel investors will also want to be part of the decision making team and they will expect to be kept up to date on the business’ financials, marketing strategies etc. The amount of money they invest may not be large but then you’re getting more than just money when an angel investor comes onboard.

Angel investors are prepared to invest their money in businesses that none of the other sources of investment funds are likely to touch but that doesn’t mean that they will take unacceptable risks. It also doesn’t mean that angel investors will invest in just any business.

Angel investors usually don’t step outside of their own industry when it comes to investing their money and they are very definitely focused on emerging businesses within that industry that have a product that is both innovative and likely to appeal to a very wide market.

Are angel investors right for your business?
That’s a question you really need to consider carefully before going in search of an angel investor. Are you the sort of business person who is prepared to share the running of your business with an outsider?

That’s something that you will certainly have to do if you’re serious about obtaining funding. Of course the amount of control an angel investor might want to exercise will be much less than you might expect from a venture capitalist but then you might find any involvement in managing and directing your business to be a little hard to cope with.

Is the amount of money that an angel investor likely to offer enough for what you want to achieve? Sometimes it is possible to need more money than an angel investor could provide so can you make the transition straight from self-funded startup to the point where a venture capitalist might be interested?

You also need to look at whether or not some other form of capital injection might be more appropriate. Remember, angel investors are looking for new and innovative products that will appeal to a wide market so does your product fit with angel investors or are you building a better mousetrap rather than something new?

Can your business really generate demand to ultimately become attractive to other forms of investment so that you can completely pay out your angel investor or are you likely to struggle to reach that point?

Those are all questions that you really should consider before spending valuable resources looking for an investor.

How to obtain angel investor funding
There are obviously two ways to go about obtaining funding from angel investors. If your business has been involved in an industry for a while you will have heard talk of who the angel investors are for that particular industry.

Once you have identified who they are it shouldn’t be too hard to obtain an introduction and then spend some time with them. Of course you’re going to have to do a little selling here … both of you and your product … if you want to succeed.

The other way to obtain angel investor funding is through your business advisor. If you don’t already have one then you should because a good business advisor is an incredible asset for your business.

Your business advisor will know which angel investor is right for your business and they can get things moving to make that angel funding start happening. If you don’t already have a business advisor then have a look at EM Advisory Corp. In these situations experience matters and EM Advisory Corp are among the most experienced business advisors that are available today.

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