Angel Investors And How They Work

As a start-up owner, finding funding for your company is super important. The concept of angel investors and angel investing is always floating around in the back of your mind. Perhaps you may not be as aware of how to go about approaching angel investors or looking for those angel investors that can fit into your company. As such, this blog is going to focus only on angel investors and how they work.

Now, why do angels investors take that risk in investing in early-stage start-ups? The simple answer is that it’s highly profitable. Angel investors now play a very large role in our country’s economy. Angel investors have become the primary source of funding for most start-ups now.

 

Who Exactly Are Angel Investors?

Angel investors are those individuals that have high net worth and they use this capital that they have to invest in early-stage start-ups. Angel investors are also known as Accredited Investors. With this being said, not all angel investors are accredited, investors. Accredited investors are those individuals whose assets are worth 1 million or more. Now angel investors are free to invest in whatever company they choose. There aren’t any rules as such that they need to follow. If they want they can even invest in start-ups members of their families start. Mostly, family and friends fund the early-stage start-ups. Approaching angel investors will bring about a certain professional element that might be missed when working with family.

See Also: Angel Investing: Red Flags To Look For

The motivation behind angel investors investing in a start-up may differ depending on the investor. Some angel investors do it purely for profit. Others are looking to participate and give their insights and expertise into the business because they see the massive potential and believe in the start-up. Angel investors are also known to invest in those companies and industries that they are passionate about. It can relate to care, sustainability, education, commerce, etc.

It’s important to note that angel investors invest their own money into these start-ups. There is no guaranteed return for them, so they are very careful with what they invest in. As such angel investors will look not only for a good start-up but a good team behind it as well. A good team will be able to help achieve the potential that the angel investor knows they are capable of. If the start-up is good and the market conditions are in their favor, angel investors can stand to make more than 10 times their investment.

 

How Do Angel Investors Look for Start-ups?

If you’re an angel investor who has just started building up your portfolio then it will take some time to be able to invest in the start-ups you really want to. Even as an angel investor you need to build up your reputation so that start-ups can trust and approach you. But once you have established yourself as an angel investor start-ups will come to you. This happens because of referrals. Other ways that angel investors acquire start-ups is through backing by other entrepreneurs, angel investors, your network, and other professionals such as accountants, lawyers, etc.

 

About the Author

Devansh Lakhani

Devansh Lakhani, the director of Lakhani Financial Services, clasps a rich experience of 5+ years in the finance industry. A Chartered Accountant by qualification, Devansh has expertly handled funds for HNI clients, been part of an IPO on SME platform to tune Rs. 10+ crores, conducted the right issues to tune Rs. 10+ crores, and accomplished block deals of Rs. 35+ crores in the past. Now, with a zeal to boost startups, Devansh's heart and soul lies in Lakhani Financial Services. To date, LFS has helped 85+ startups with advisory, business plan & pitch deck preparation. Devansh is one of the most respected people when we talk about startup funding, advising, and mentoring. With the support of Devansh, 6 startups raise funds to the tune of 4+ crores. He aspires and is on the mission to boost and scale 1000+ startups in the next 5 years.

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