How angel investment can benefit your business

Angel investors are wealthy individuals or groups of individuals or business that invest money or equity financing in start-up or early-stage small businesses. They often invest amounts ranging from $25,000 to $100,000 in small businesses.

An angel investment is an equity financing where the investor gives funding in exchange for an equity position in the company.

Angel investors particularly care about:

· The quality, passion, commitment, and integrity of the founders.

· The market opportunity, and the potential for the company to become big.

· A well-crafted business plan.

· A valuation with reasonable terms.

Benefits of angel investment.

Fast approval

As mentioned earlier, angel investors are individuals that are wealthy and want to invest their money in other businesses. This means, they are not bound to go the structural form of investment, that is, no board of directors or shareholders to consult before investing in a business. Once they are convinced you have what it takes to make your brand survive and grow, the approval and due diligence processes are usually fast.

Appropriate for small to medium businesses

Angel investments is usually within the range of $25,000 to $100,000 making it a perfect fit for small and businesses. It provides an easy transition from bootstrapping to investments. The funds are usually given as a whole, while other investments may spread over time depending on the amount.

Accepts high risk ventures

As financial institutions are usually hesitant to fund startups as a result of the increased rate of failure of startups to survive the first 5 years. Angel investors are often willing to invest in high-risk ventures, as they invest in the person than the business, as long as the founder remains committed and focused.

Invaluable knowledge

Angel investors do not just invest and leave you to figure out how to make your business work all by yourself. Just like mentors, they are personally involved; they provide invaluable knowledge and experience as they work directly with the business they fund to ensure it becomes a success. They offer guidance, refer clients, they may go as far as introducing you to people in their network and providing advice/suggestions.

Having considered the benefits of angel investment on your business, here are the flipside you should know before you jump on board with the next angel investor.

You Aren’t in Full Control

As a bootstrapper, you have complete control of your business. You are the sole decision maker and you don’t answer to anyone. The moment you get funded by an investor, this changes. It is likely that the investor is going to want to take an active part in making decisions which affect your organization’s outcome. Even if they give you control, you will still be accountable for explaining the reasons behind some of your decisions. Prior to starting to look for your angel investor, you must ensure that you are at ease with permitting somebody who isn’t intimately familiar with you or your business to play a role in how it is run.

Loss of equity

Apart from losing full control, the company is no longer entirely yours if you get angel funding. The investor will want a chunk of your business in exchange for their money, and it might be a big chunk. Take independent advice to get an idea of what’s reasonable and set your limits before negotiations begin.

In addition, angel investors, in their desperate bid to foster the growth of your business, may hire skilled professionals to run your business. These professionals usually demand more salaries and wages than you planned fo

Pressure to perform

From the angel investor’s point of view, they’ve given you money and they want it back — with interest. Expect your business to be monitored and metrics to be analysed in detail. This isn’t always a bad thing, as other people’s high expectations can help you work harder and smarter.