7 Things You Should Know About Angel Investors
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7 Things You Should Know About Angel Investors

Is your startup company beginning to consider working with an Angel Investor? Below are some tips you may want to keep in mind throughout the process.
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Knowing about angel investors is a must for anyone involved with early businesses and start-ups. Angel investors are a viable source for businesses trying to get funding.

What exactly are angel investors?

Essentially, an angel investor is an individual person that funds businesses and start-ups with their own money. Angel investors fund start-ups in early stages of development usually gaining equity in return with hopes that they will flourish and become lucrative.

A pair of black and white angel wings flapping
Photo Credit: Phat Kandi

What’s the difference between angel investors and other types of investors?

Given that the angel investor is an individual, they typically have a closer relationship with the business and are more directly invested in its growth by providing expertise and guidance. Whereas a venture capital firm or hedge fund is investing in lots of different businesses, and are usually less hands on. Other types of investors use an investment fund.

What are the pros of angel investors?

Angel investors allow start-ups to gain funding without having to take out large business loans. They also are more motivated than the typical investor to help a business succeed given that it is their own personal fortune being used to fund.

What are the cons of angel investors?

Since they’re making a high risk investment in funding a start-up, they normally require a high percentage of the company’s equity in return for the funds. This might lead to the angel investor having too much control over the direction of the company.

Who qualifies as an angel investor?

The monetary qualifications for an angel investor are at least $200,000 in annual individual income or at least $300,000 in annual joint household income. The full list of qualifications is more in depth. Most angel investors are accredited investors, which means they have a minimum net worth of $1 million.

Mr. Crabs from SpongeBob throwing around money at the Krusty Crab Restaurant.
Photo Credit: SpongeBob Square Pants

Where can I seek out angel investors?

The two largest databases for angel investors are AngelList and Angel Investment Network. But they can also be found on large networking websites like LinkedIn.

How prevalent are angel investors?

The potential number of angel investors is 4 million. Estimates say that around 300,000 people have made an angel investment in the last two years.

What makes a business desirable for angel investors?

At the end of the day, an angel investor is looking for a high return on investment. That means a company must have an established product or service, have a large established or potential customer base, and show high potential for rapid growth.