Skip to content

Angel investors: Definition, Pro & cons of Angle Investing

  • by

Welcome back to our website, and today we are going to tell you about what are angel investors and how to find Angle Investors its advantages and disadvantages in the business and how the term Angel investment come into the light and what Angel investors look for before investing in a company but, before that what are Angle investors in simple language

Who is an angel investor?

Angel investors are the initial investors also known as seed investors, private investors or Angel founder they are the rich investors who provide funds for small startups and companies in Exchange with the ownership in startup or company.

The capital invested by angel investors can be a one-time investment or investments after a specific period to start a company. The amount invested by angel investors cannot be below $5000, and it can go up to 2150000 dollars. Some Angel investors group come together to invest unto 1 million for a selected company.

Angel investors are different from venture capitalists as they did not demand aggressive revenue growth in a short period rather than Angel investors are concerned with the commitment and passion towards the startup of the founders and the larger market opportunity that they have at the initial stage of his startup, and they are not in a hurry to make profits like venture capitalist, but they also don’t want to lose their money, so they choose startups wisely.

Origin of term Angel investors

The term Angel investors has come from the Broadway Theatre where wealthy individuals give money to artists to pursue their arts the term Angel investors was first used by the University of  New Hampshire’s William Wetzel, founder of the Center for Venture Research. He started using the term “angel investors” to describe the investors who supported startups in their initial stages.

In the report of Center for Venture Research, there were 258,000 active angel investors in the U.S. in 2007. And these numbers are increasing on an annual basis, as recently as 2017 angel investors invested around $25 billion into 70,000 companies.

How Angel investing works

As we already told you in the definition of Angel investors that they are the seed investors who provide funds at the early stage of a company.
Angle investors sometimes invest after the initial funding round, in which the capital normally invested by founders their friends and families to back their startup or Idea in initial phase.

Process of Angel investment

This is the process of Angel investment, from how Angel investors find a company to the last stage of Angel investment.

  • Angel investors find young and developing startup through the seminars and conventions and there are many websites from which you can find many startups in their initial stage who need funds to grow their business.
  • After finding a good startup to invest in, Angel investors conduct a meeting with their founders and discuss ideas in how they can help a Startup and what are their plans and ambitions regarding the company.
  • And after meeting and having verbal contact if everything goes right with these two steps then angle investors and founders comes with the terms of investments. In the Agreement The investment terms, payouts or company ownership, angle investor rights and protections, governance and control parameters and in the end an exit strategy for the angel investor.
  • And if the things go right and founders and angle Investors comes to a legal agreement, then the deal is officially closed, and the investment funds are released for the company’s use.

Angel investors vs Venture Capitalist

There are many similarities between Angle Investors and Venture Capitalist and Differences too, and here we are going to see some differences between Angle Investors and Venture Capitalist.

  • Venture capitalist and Angel investors both invest in startup, but there is difference in the stage of investing in both of them. Angel investors find startups in their initial stages while venture capitalist invested in startups that are struggling with finances, so that is the major difference between venture capitalist and Angel investors.
  • Another major difference between venture capitalist and Angel investors is that Angel investors invested in an idea that can or cannot become successful, but venture capitalist would like a proof-of-concept in hand before investing in a company.
  • Another major difference between venture capitalist and Angel investment is that Angel investors are private investors, while venture capitalist are the professional investors who invest other’s money.
  • Angel investors typically invest in smaller amount as compared to venture capitalist whose average funding goes up to 2 million or more and funding of Angle Investors goes up to $100000.
  • Angel investors do not demand involvement in the company’s decisions, but venture capitalist invested and keep their hands in the functioning of a company.

Pros & Cons of Angel Investing

There are many pros and cons of Angel investing and reasons why many companies prefer Angel investors and many don’t, so let’s see some advantages and disadvantages of Angel investing.

Advantages of Angle Investing

First we are going to see what are the advantages of Angel investors

No liability, the first advantage of Angel investing is that you don’t have to pay the amount invested by angel investors if your company goes down or your idea didn’t mark unto the exaptation.

Less or no administrative work if you are an angel investor you just have to put funds into a new startup and watch them grow it’s like showing a seat in the ground and watch the tree grow, so you don’t need to do any administrative work if you are an angel investor.

You may get extra funding, when an Angle Investor invests in a startup the goals are to make that startup big so if a Startup need more cash they can ask their Angle Investors to pump more fund in it.

Disadvantages of Angel Investing

Above you see some advantages of Angel investing now we are going to see some disadvantages of Angel investing.

Less administrative control as we already told you that it can be an advantage or disadvantage because companies who work with angel investors have to give a percentage of their equity to Angel founders which is in less amount as compared to if it becomes a huge company.

Angle Investors get a Large amount of equity Angle Investors get a large amount of Equity in compensation, which is by far a Disadvantage to the founders.

Conclusion-

We hope that by Reading This Article You can get an insight about What is Angle Investing. Its Advantages and Disadvantages And difference between Venture Capitalist And Angle Founders. And if you have any quarries Regarding Angle Investing, please comment.

Leave a Reply

Your email address will not be published.