A startup business requires lots of support from other sources apart from the finance. In case of finance there are many investors in the market who are willing to fund a potential business. The demand for angel funding is due to the kind of development support they provide in the form of advice and consultations. In addition an angel investor comes across as a person with good contacts which will enhance the growth of the business. Angel investment fund providers expect high ROI from the business they support. Being highly successful entrepreneurs, the angel funding providers are always zealous to help startups to establish in the field. The startups which need angel funding are always business with a budget below £ 1 million. The need for angel funding in the startup market is second to venture capital albeit angel investors play a major role in funding businesses.
Small and medium size businesses are often those who need angel funding. Regardless of any facts to support the factor, angel funding is considered to be core to the growth of startups. When venture capital are provided by firms angel funding often comes from successful business people who are negligible in number. Some of the angel funding come from friends and families of the new entrepreneurs. Researches are on to find out the enormity of angel funding market. Though people who need angel funding is growing the angel capital sector is smaller than estimated. Since the seed capital is the forte of angel funding the business are stereotyped. A large majority of the angel funding comes from unaccredited investors.
In the UK a campaign was conducted to zero in on high net worth individuals who can be provide angel funding to promote startups which struggle to find them. The need for angel funding cannot be met with the current strength which declined during the recession. Post recession many angel funding providers hesitate to invest. The risk involved in angel investment is high so also the returns. The investor depends on the expertise of the investor with his money. The success of a startup is often due to the intellectual support of the angels who themselves are successful business personals. The capabilities of the management team are of utmost importance to the angel investors.
Business Angel Funding
Business angel funding investment providers differ in their outlooks. Some of them are experts in the field with strong economic background to support businesses. They come on handy as good advisors and guides to the entrepreneurs. Another less experienced angle funding providers like to go high-tech in their investments. They are quite passive in their associations with the firm they have invested. While some of the angel investors are concerned about the returns, some others are retired executives who like to get engaged in some activities post retirement. There are professional also who are involved in angel investments.
Angel Funding for Startups
Startup businesses form the large majority which seek angel funding as the second round investment is often taken care by venture capital. To gain angel funding for startups there are certain things to keep in mind. The prominent among them is the business plan. A well drafted business plan will ensure an association with a veteran angel investor who will also be a good consultant. Sans good business plan an angel investor will not like to get connected even remotely. The profitability of the business should be vivid in the business plan to appease the investors.
Ample potential to get the expected ROI which is usually 20%-30%, is another factor that an angel funding provider looks for while investing in a startup. This is after the business crossed the initial struggling two years. The idea need to be innovate and will be accepted in the market with aplomb.
Angel funding providers look for healthy tie ups with the entrepreneurs. They expect the management to be flexible in association and transparent in dealings. Considering this as good for the growth of the company the startup companies need to adjust to certain demands of the angels.
Business angels have the advantage of tax relieves much to the advantage of the startup business. This will help the startups regarding tax savings. Another thing to plan and draft is a careful exit strategy to avoid confusions later. It is always advisable to decide on the exit in the initial stages itself. The kinds of perks and bonuses that will come to the angel funding provider during exit also need to be mentioned in the exit strategy. Business angel funding is always a temporary procedure, hence the term plan is essential.
Business angel funding provider has another advantage of exit. Angle investors are usually seed capital providers as the second round of investment is mostly done by venture capital firms. The term till the demand for a second round of investment can be the term of association for the angel funding provider and the startup companies.
Angel funding providers expect a certain position in the company during the term of association in the startups. The role of the angel funding provider can be that of a board member, consultant or advisor. An angel investor always likes to be consulted on major decision during their association. This cannot be avoided since the money invested belongs to them and they have the right to ensure that the company is progressing.
Small business angel funding is the right choice as the amount will not be higher and the investors are more than happy to be associated if the business plan presents a potential picture. Many small businesses seek angel funding as venture capital and bank loans are usually involved with large business. The angel funding also has the advantage of having an investor who can also be source of support in various aspects in business.