What is Angel Investing? Is it good for small startups/Entrepreneurs?
Your startup has started, you have built the team, and the sales are going well. You are ready to take your firm to the next level, but you need more finances to grow. Here angel investors might be what you need. Many startups and entrepreneurs need clarification on various funding resources available in the market and need help understanding the meaning of angel investors. So, here is the blog post that will walk you through about angel investing and how it is beneficial for entrepreneurs or startup businesses.
What is Angel Investing?
Angel investing is the type of financing where a wealthy private investor or a group of investors funds a startup in its initial stage of development in exchange for equity in the business. These investors are popularly known as angel investors or business angels.
Alt Text:- Infographic of Angel Investing for entrepreneurs
Who are Angel Investors?
Angle investors are high-net-worth individuals who provide promises of financial banking to startups or entrepreneurs in exchange for ownership equity in the business. Most of the angel investors are successful entrepreneurs themselves and have a wide set of expertise in the industry they are investing in. But that’s not their only point of origin. The angel investors can be: –
- Business professionals like doctors, lawyers, accountants, and financial advisors.
- The company executives who have risen through hard work and ranks and know how challenging is to run a successful business.
- Small owners and entrepreneurs who have already launched successful companies and looking to support startups that have a profitable future long way.
- Investors who finance small businesses as a professional pastime.
- Crowdfunding platforms work by raising pools of money from a group of people. Each person invests a small amount in exchange for a small share of any eventual profits if the company proves successful. This model is a great way to get funding for your company without giving up too much equity.
Small startups or business owners generally seek angel investing in order to launch their venture successfully. Let’s understand how angel investors can boost business growth.
How to Find the Angel Investors?
Finding angel investors is a straightforward process. Following could be the series of action for the same-
- Find the list of angel investors on the online platform who are ready to help business owners.
- You can also connect with the angel investment network to look for the right investment partner for your business.
- Start by finding angel investors geographically, to know how many active investors are available to fund your business.
- Professional social networks like LinkedIn can give you direct contact to connect with the right angel investor.
- Target industry associations and several digital platforms to find a good angel investor.
Before approaching an angel investor for funding, it’s important to have your business plan ready and set in place. This is because potential investors will want to see that your business has the potential to be successful before they agree to put money into your company. By having all the necessary information and documentation prepared in advance, you’re more likely to receive funding from an angel investor as opposed to someone who is not as convinced of your business’ potential.
Advantages for Small Startups or Entrepreneurs to Go with Angel Investing
- Access to Expertise
Angel investors often have an abundance of business knowledge and expertise. Getting such an investor means that you are getting access to the industry expertise in the form of mentor.
- No obligations
If the company goes bankrupt, business owners don’t have to pay the angel investor back because they haven’t applied for a new line of credit and most angel investing involves equity deals.
- Acquiring the much-needed funds
When angel investor funds the company, they often fund in the form of a lump sum. These long-haul funds are much needed for small business owners or startups.
- Less administrative work
The businesses that raise funds from angel investors are likely to be free from investment filings and state regulators. This minimizes much of the administrative paperwork.
Angel investors provide an essential funding source for many startups, which has helped foster innovation and economic growth over the past few decades. The lure of profitability has made angel investing a popular choice among investors, leading to an increase in the number of angel investors in recent years. This influx of capital has allowed startups to pursue innovative ideas and brings new products and services to market, stimulating economic growth.
Depending on your business type and stage, you might want to opt for the most relevant funding method. For example, A D2C brand with healthy revenue streams might not want to dilute equity, such businesses can opt for revenue-based financing from players like Velocity which is India’s largest revenue-based financier.