Often times when running a start up business, an owner runs out of capital to push the business forward. In these moments of uncertainty, angel investors move in to help with the capitalization challenges of the company but allows the owner complete reins on how to run his organization thus acting like a guardian angel in times of trouble. This is where the angel in angel investor was coined. An angel investor maybe an affluent individual or affiliated group of people with a net worth of a million dollars or more and has the capacity to invest without going bankrupt in start up companies.
Q: Do angel investors freely invest on start-up companies without something in return?
The answer is no. Angel investor financing usually is expensive with costs ranging from 10-50% of a companies equities or in exchange for a convertible debt. Investing is totally different from a business owner’s point of view. In investing, money works for the investor instead of working for the money itself. In essence, every dollar is like an employee working for the investor which when invested makes more money for the investor without them even sacrificing time. Money begets money.
Q: How do angel investors work to make money?
Since angel investors have money, what they do is invest on other companies that can make money for them. This doesn’t mean that they have intentions of running your company for you. They prefer you to run the company by yourself but for them because they own company equity. When you make money they make money as well without any effort on their part. And if your company goes down, they just sell. However before they do invest in companies, they conduct their own research. They conduct studies to identify your company’s strength and weakness. They do this because they want to know if the risk will be worth it at the end.
Q: Where can you find angel investors?
Try searching the words Angel Capital Association online. Here you would find numerous organizations and affiliations that do angel funding. If you own a business and are looking for support funding, try listing down a number of organizations you can approach. Try searching for additional information on their requirements. This way you can prepare a proposal based on their conditions and get a more favorable response.
Another way to look for angel investors is by asking your own attorney or accountant. Since they do business with several clients, they might be able to refer you to a couple of people who have connections. Also try visiting your local Chamber of Commerce and network with some people and groups there. There’s a chance you might be able to meet potential angel investors there as well.
Q: How can I convince angel investors to invest in my company?
Start by creating a proposal. However make one that’s direct to the point. In your proposal include how big your market size is and how much potential revenue that can be made. Of course include how much funding you need from them.
