A new business requires solid business funding to move ahead. For this entrepreneurs look out for different investment sources. One of them is angel investor who is an economically elite entrepreneur who invests for a short term and exit on reaching the target. In the UK Angel Investment is getting more and more popular. An angel investor often gets an ownership equity or convertible debt in exchange for the investment they make. Conventional angel investors are usually single individuals who invested in small ventures. Today there are groups of investors who together fund startups. A group of angel investors form the archangels or angel groups who share information and pool their money to invest in chosen enterprises.
Angel Investments
Angel investors do not invest large amounts for huge ventures. They usually invest in medium or small startups. An angel investor looks for about 30% of the return within ten years. The angel investors have come a long way from the earlier mode of lending to known people to lending to people with expertise and innovations. The previous covert lending has given way to deals with documents and the money too has increased. Modern day angel investors lend with the intention of getting good ROI.
The increase in venture capital firms made the angel investors change their lending habits. Angel investors’ networks are also factors that influenced these investors to fund for profits. The initial small lending concept being changed the angle investment sector became more systematic in operations and popular. As the demand for angel investors increased among new entrepreneurs, the investors became stringent in their approaches. Angel investors are prominently seed capital providers, whereas venture capitalists take care of the second round.
Angel Investment in Today’s World
Angel investments are now a very convenient mode of funding with lots of firms entering the fray. Angel investors are economically major contributors. A carefully done investment reaps huge benefits. Globally around 300,000 businesses of small sizes are funded by angel investors.
Angel investors are ideal for funding the initial stages of a startup with
The Process of Angel Investment
Angel investment, though smaller than venture capital, has complicated investment process. A new entrepreneur needs to have in depth knowledge about the investment process before finalizing on the investor. First and foremost the entrepreneur needs to zero in on good angel investors. The prospective investors can be found in many places such as online firms, business incubators and many other sources.
A meeting with the investor with an impressive business plan is crucial for approval. Angel investors need to be convinced about the growth potential of the startup to agree on investment. An unimpressed angel investor will leave the entrepreneur go searching for another one. When an angel investor is willing to fund the business the main thing to find out is the range of financial support that the investor can extend. After knowing about investments the entrepreneur can decide about approaching other sources for rest of the funding. An angel investor also acts as an advisor in this matter and one can depend on angel investors to know about whom to depend on for rest of the funding.
Negotiations start after finalizing on the investment part. Working terms such as manner of investment, percentage of investment and other related details on investments need to be discussed. Another point to consider is the returns and angel investor is going to get on such an investment. A pre planned exit strategy should be documented much in advance. Conditions on withdrawal of the money by the angel investor need to be drafted. This includes the returns in the form of salaries, fees and dividends.
Angel investors being high net worth and experienced entrepreneurs they come handy in many other aspects other than financing. A strategy for business development can be drafted with the intellectual support of the angel investor. A consensus on task allotments to angel investors and entrepreneurs regarding the running of the company is required to avoid future commotions. Monitoring the development of the company and people associated with it is essential for the future of the company.
The angel investors need to keep track of the financial aspects of the company throughout the investment term. Details of legal and financial framework should be provided to the angel investor, who if necessary can take the help of auditors to monitor the accounts. Legal documents to prove the authenticity of the business should be produced before angel investors for credibility. This is important to avoid legal complications in the future if the business goes bankrupt. Regarding other legal regulations the angel investors and entrepreneurs are need to take legal advice on business issues. A tax efficient investment is also required for structured investment process.
Where to find Angel Investors
Angel investors are present aplenty in the UK. There are many online websites which are helpful for entrepreneurs and investors to get information easily. Ones the details regarding the angel investors and their function mode are comprehended the startups can approach them through the website or meet directly to decide about future associations. The online sites offer details on individual investors or a network of angel investors who are also called archangels. It is always better to choose an angel investor who takes keen interest on the startup idea, for smooth operations. Angel investors are usually patient and often analyze how to get the ROI prior to investing.