Facts About Angel Investors You Should Know

facts about angel investors

Angel investors are filthy rich individuals that provide seed capital to the companies. All the entrepreneurs require funds to start their business. The very first fund during startup launch is known as seed capital. Angel investors can be found anywhere online. After finding an angel investor, it is necessary to know some facts about him or her, so that you get an appropriate angel investor for your startup. In this article, we will know some facts about angel investors.

Some Facts About Angel Investors

1. Angel Investors Spend Significant Amount Of Money

A question that is most frequently asked is how much do angel investors spend. Angel investors could spend about $50000 to $100000 as the seed capital. Sometimes, they could provide up to a million-dollar when they see a big opportunity in a company.

2. Angel Investors Have Certain Qualities

Your angel investor should have certain qualities before he or she starts investing in your business. Four important qualities in them are as follow:

  1. An angel investor should have an income of more than $100,000
  2. He or she should have an age between 40 to 60 years
  3. Net worth should be more than $1,000,000
  4. Should possess some former successful entrepreneur

3. Angel Investors Look For Many Things Before Funding

Nowadays, everyone strives to get angel investors for startup. However, angel investors are known to observe several concerns when they initially approach a business. Some of these are product prototype, elevator pitch which is fully articulated and summary of an executive. In addition to this, they can look for customers and earlier adopters of your company.

4. Risks Involved With Angel Investors

Nowadays only one business succeeds from a group of ten businesses. There are lots of risks involved when angel investors deal with your business. They may deny it sometimes. Angel investors will be able to invest money if your business does not seem to fail.

5. Accuracy Of An Angel Investor

In order to know about the accuracy of angel investors, you should ask some questions from them. The questions could be related to your reference to other businesses, portfolio company preferences and accurate seed capital amount.

6. Angel Investors Invest With Note Convertibles

Angel investors could spend their funds using note convertibles. Negotiation terms would be secured or unsecured on company assets. Also, the rate of interest is not directly paid but accrued.

7. Angel Investment Is A Time-Consuming Process

Raising seed capital from an angel investor generally takes lots of time. You will have to attend due diligence and meetings that will implement terms and conditions. All of these will always consume your valuable time.

8. Angel Investors Do Not Sign Nondisclosure Agreements

Angel Investors observe several investment opportunities day to day, and as an entrepreneur, you should not miss them in any way. Also, if you get an angel investor, it is essential not to reveal any confidential information.

9. Angel Investor Considers Many Things To Determine Your Success

The success of your business can be determined by several factors. An angel investor could look for market conditions, past achievements, competitive environment, value add from the investors and market opportunities.

10. Document Requirements For Angel Investment

An angel investor may ask you for several documents. Some of these documents are as follows:

  1. Bylaws
  2. Resolutions from organizational boards
  3. Tax Identification Number
  4. Charter documents
  5. Stock option strategies for directors and other staff members
  6. Confidential Information and Invention Assignment Agreements for all staff members and contractors
  7. Capitalization Table and Stock Ledger

Thus, there are several documents required.

11. Angel Investors Give Several Benefits

Although there are lots of risks involved with angel investors, they can present several benefits. Some of these benefits are as follows:

  1. You get contacts from Venture Capitalists
  2. You get contacts from strategic partners
  3. Counsels and advice are offered
  4. Contacts of potential customers are offered
  5. Contacts of potential employees are offered
  6. Contacts of professionals like lawyers, chartered accountants, banks and investment bankers are offered
  7. You are able to understand strategies and marketplace

12. Angel Investors Could Deny For Investment

Yes, you read it right! An angel investor could simply deny funding support if he or she observed that your founders are not knowledgeable and passionate enough to make the business successful. Also, if the potential size or market opportunity is very small, angel investors will simply reject their investments.

Final Thoughts

In this article, we have discussed some facts about angel investors. Entrepreneurs have to deal with lots of problems when they attempt to raise money for the business. Here, we have also seen that getting financial assistance for a startup platform is not as easy as pie. You need to work a lot to get some investors for supporting your business. However, you should not worry because an angel investor would certainly help you out if he or she will find your business valuable.

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