Angel investors are high net-worth individuals or groups who invest in entrepreneurial companies, usually at an early stage. Many angel investors provide cash to young companies and take equity in return.
One difference is that angel investors typically invest smaller amounts of money individual companies than business enterprises do, making them a possible resource for companies that have exhausted their “friends and family” financing options.
Tapping into these networks is one great way to start looking for investors. Make use of your own personal network, especially your professional advisors. Your network may well be able to suggest potential angels.
The phrase “angel investor” conjures up a vision of some kind of saintly benefactor willing to take a flier on some magical notion of a business that has little chance of success. Nothing could be further from the truth.
Angels invest for the same reason other people do, to make money. They hope that some of their investments will reap them high rewards in return for the high risks they are taking.
They are well-off people, often former company builders with a lot of experience who are willing to put anywhere from $10,000 to half a million or more into promising start-up companies.
Angels are difficult to identify. That’s because generally they like it that way, if only because they aren’t interested in having thousands of entrepreneurs flooding their email boxes with business plans.
Staying under the radar allows them to pick and choose their sources for their quality deal flow. Angels like companies that appear likely to grow at 30 to 40 percent annually and then be bought or go public.
They do not want to be shown a plan that doesn’t feature a way for them to make a profitable exit. The angel groups are becoming very organized by collecting data, establishing benchmarks and encouraging individual angels to fulfill the high standards.
Usually a staff or screening committee of angels will select a group of potential businesses for further investigation and out of that bunch a few will be invited to present their forum before the entire angel group.
If an angel investment group targets you it is a great chance to gain not only as a financial prospect, but you also gain a valuable advisor. This group can contribute significant experience, knowledge, and networking opportunities, as well as the cash you need to grow your business.
A good reason they are called angel investors.
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