Angel Investors: What Is Angel Investing & How to Find

Angel investors are high-net-worth individuals who give financial support to tiny businesses or entrepreneurs, generally in return for an ownership interest. Angel investors are often found among the family and friends of a business. Angel investors may put money into a business just once to help it get started, or they may invest in the business regularly to help it through its early, difficult stages.

Angel investors can be successful business owners who have knowledge or experience in the field in which they are investing. In addition to investing, they can help a small business by giving advice, making connections, and sharing what they know.

Angel investors are interested in startups and small business ideas, but they also want their money to grow and pay off in a big way in the future. This means they may pay close attention to the startup's business and get involved in making decisions to make sure their money is used well.

In this article, we will look into angel investors for startups; an example of an angel investor; the difference between a venture capitalist and an angel investor; and the pros and cons of angel investors.

What Does an Angel Investor Do?

Unlike venture capitalists, angels often do not work in the investing area full-time. Instead, they are often selected from the ranks of company owners, well-to-do professionals, and other wealthy people with the means to invest in a potential startup. They are often experienced entrepreneurs who have developed successful businesses and want to support the next generation with hands-on guidance and the advantages of their expertise while possibly generating a reasonable return.

In return for their investment, an angel often receives a share in the firm as well as the opportunity to provide advice and direction to the founders. Then, five to seven years later, if everything goes well, they hope to earn a handsome profit when the business goes public or finds a buyer.

Angel investors give money to businesses in a wide range of fields. The Center for Venture Research at the University of New Hampshire says that in 2020, angel-funded businesses were in the seed and startup stages for the first time in a few years. In that year, a total of $25.3 billion was spent on investments, which is 6% more than in 2019.

What Is An Example Of An Angel Investor?

For instance, consider the concept that Joshua has for a means to power widgets not with electricity but rather with miniature solar panels that can be bent and stretched. To capitalize on the concept and get the product on the market, he will first need to create a prototype and then launch a company.

Joshua can locate Samuel Jones, an angel investor. Samuel is a prosperous friend of a friend who is enthusiastic about Joshua's proposal and hopes that it will be successful. Samuel is not concerned about the possibility that Joshua's product might not function as advertised or that Joshua might turn out to be an unreliable businessperson. In exchange for his $100,000 investment, he was given a forty percent stake in the business. Joshua puts the money to work by constructing the prototype and launching the enterprise. Samuel gives good business advice and encouragement.

What's an Angel Investor vs. a Venture Capitalist?

Angel investors and venture capitalists seem identical at first glance. Both invest in small businesses in exchange for ownership. However, in many aspects, they are distinct types.

Angel seed investors put their own money into a small business, which makes it much more personal. Venture capitalists, on the other hand, are institutional investors. Angels usually invest before venture capitalists, and they want to see evidence that the founders they are investing in are dedicated, talented, and able to keep going even when things get tough.

Angel investors, unlike typical venture capitalists, make investment choices rapidly and seldom need board membership as a condition of investing. They also often invest less money than venture capitalists. As a result, they are an appealing financing alternative for businesses that do not need huge investments and want to keep greater control over their business.

The Pros and Cons of Angel Investing

There are some advantages of angel investing as well as some disadvantages.

Here are the benefits of angel investors for startups;

When you give ownership shares to an angel investor in exchange for money, your business doesn't have to pay back the money. Angel investing is usually only for businesses that have been around for a while and are no longer just starting up. These businesses have shown that they can make money, but they still need money to make new products or grow. Because an angel's money is at stake, they can be very motivated to help you succeed by mentoring you or giving you direct help with the management.

One definition of an angel investor is someone prepared to take risks. To qualify for a small business loan, you will typically need to jump through a few barriers and overcome a few obstacles, which are things you might not have to do when dealing with angel investors. "Angels" are frequently established entrepreneurs who understand the risk and are comfortable with it. Even if the bank agrees to lend you money, they may limit the amount to reduce their risk. Angel investors may make larger investments if they believe in a business's potential. 
 

Numerous investors have professional networks. This suggests that they may often use the resources of other individuals to invest alongside them. This decreases their risk but enhances your profits since you may benefit from their expertise and financial strength. Or, the introduction may provide specialized knowledge, such as a marketing specialist, who could assist you in advertising your startup.

Here are the cons of angel investing; 

Angel investors usually want 10% to 50% of your business in exchange for money, which is a big downside. That means business owners could lose control of their business if angel seed investors decide they are keeping the company from doing well. It's important to think about how much equity you want to give to an investor in exchange for funding. If you give too much and things don't go well, the angel investor may own more of the company than you do.
 

Some entrepreneurs find angel investors annoying since these investors have high expectations and the entrepreneur assumes the most risk at the beginning of the startup. Therefore, they want to ensure that they get all of the money they've earned from the contract. They want to ensure that their time and money are profitable, and they may even establish a timeline for when they would want to see a particular amount of profit throughout the years. 

How to Find an Angel Investor for Your Startup

Finding angel investors is a very simple procedure. Angel investing is all about connections and trust. For your small business to get the best angel funding, you will have to go out and meet people. Angel investors can be found at events like fundraisers and conventions.

Angel investors can also be found on the Internet. Before you meet in person, you can use online platforms to help you find the right people. Because they maintain a network of angel investors, these platforms serve to fill the financing gap that exists between investors and entrepreneurs. You can also look for networks or groups of angel investors. If you pitch angel networks, your chances of success will probably go down, at least a little.

Once you've found possible angel seed investors, set up a time to meet with each of them separately so they can hear your pitch. Before your meeting, work on your small business pitch. Your pitch should be short, easy to understand, and easy to remember. Even if someone doesn't know you or your business, that pitch should tell them everything they need to know.

So, where do you find the best angel investors for your startup?
 

Eurokick is an excellent starting point, whether you are searching for angel investors for your firm or wanting to invest in startups. Eurokick offers anybody the opportunity to invest in private companies that have been approved and assist them in raising financing.
 

Eurokick has made it simpler than ever to get angel investors for your startup. Please feel free to contact us.