Early-stage startup companies have big challenges ahead when it comes to making their business a success. You already have the concept. You may even have an eager customer base ready to buy the products. What you may still need is the seed money to get operations off the ground. Without the proper funding, success may be unattainable. It is often important in these early stages for a startup company to for angel investors to help get things moving in the right direction.
What are Angel Investors?
An angel investor is an entrepreneur much like yourself. They have had the previous experience of owning and operating a successful business until they became a very high net-worth person. They are ready to invest their own funds into a successful startup company to help you build and grow your operations.
Since they understand the high risks of investing in early-stage startups, angel investors seek companies that hold a certain criteria. You, as the business owner, have to be ready to build up the business until the time comes to exit through a merger or sale. This process is how the angel investor gets a return on their investment.
In the past, many angel investors would try to stick with companies close to home, but the advent of the Internet has made it easier to invest globally. Websites like BrokerDealer.com are part of this revolution. Ideally, angel investors are looking for a startup company that promises high returns, scalability to its operations, strong management, and a unique product or service that will attract a large market for an extended period of time.
What Is the Difference Between an Angel Investor and a Venture Capitalist?
You may be wondering what the difference is between an angel investor and a venture capitalist. Both are entrepreneurs who invest in startups that promise high returns. Yet there are some major differences between the two of them.
While an angel investor will give your business the seed money at the very early stages of your operations, venture capitalists usually wait until the startup has a bit more groundwork underneath it and is beginning to produce revenue. Angel investors also often invest using their own funds. Venture capitalists, on the other hand, will use other investment sources such as foundations, pension funds, and insurance companies.
Another major difference will be the amount of invested money given to you. Angel investors normally stick with investing smaller amounts ranging up to $100,000. A venture capitalist may invest $2 million or more into your startup. Some angel investors may work in entrepreneurial organizations called angel groups that will invest from $200,000 up to $2 million in a startup based on the size of the group.
Understanding angel investors and how they operate can help you decide if they are the ideal investment partner for your startup. If you are running a fledgling startup and you don’t mind giving up some ownership of their business, have a high-demand product or service, expect large revenues in the coming years, and have an exit plan in place; then seeking an angel investor may be the answer to your company’s financial needs.