The Meaning of Angel Investor
Finding money to fund a new business venture is one of the most challenging things an entrepreneur must do. When you have exhausted your own stores and the generosity of friends, family and government loan programs, you are left looking for another option. Angel investors may be the right choices for your new business venture.
Other People Are Reading
-
Definition
-
Angel investors are individuals who have a high net worth and choose to use their funds to invest in companies led by entrepreneurs. While there is no rule surrounding the time frame in which angel investors invest, they typically do so at the early stages of the business. This is similar to the way a venture capital firm functions, but with an individual standing as the investor, which may mean smaller investments.
Role
-
In addition to providing funds for an entrepreneur, angel investors often step in as a guide or counselor. They typically choose to invest in companies working in areas they are familiar with, so they can provide guidance as the young business grows. They can also provide a networking function for a young business owner who may not have as many contacts in the industry.
-
How Investment Is Rewarded
-
Angel investors can invest on one of two basic ways: either through making a loan or buying a stake in the business. If your investors prefer to have a loan, set up the repayment agreement very clearly, showing how you will repay and what the interest rate will be. If the investor will own a stake in the business, clearly outline how much of a say he or she will have in the way you run your company. You may want to use a lawyer to set up your documentation legally.
How to Find One
-
Angel investors may work with angel groups. Entrepreneurs who are interested in this type of investor can find these investors by networking with these angel groups. You may also be able to find one by working your own personal network. Even if your professional contacts are not investors, they may know of interested people who have the capital to invest in your business. If possible, have someone the investor trusts introduce you to give you credibility.
-
