Pros and Cons of having an Angel Investors
Financing a business can be a hard task, especially if you do not have the finances to begin with. But the lack of funding should not hinder you from realizing your dream of launching your own business and becoming a successful entrepreneur. With so many financing options available to everyone, all you need to do is explore your options and see which one will suit your profile and your financial capacity. One financial vehicle worth checking out though is angel investors. When getting an Angel Investors it’s like choosing your business partner. Few questions that you need to ask yourself before deciding to go for an Angel Investors. Can you work with them? What can they give you? Is the deal they are offering sounds fair to you? Is the location accessible to you? Now, that we know the question that we need to ask ourselves. Let’s now discuss the pros and cons of having an Angel Investors.
Some advantages of having an Angel Investors are they prefer to fund High risk businesses. They want to invest huge amount money and would understandably require you to give up huge portion of the ownership and profits. Business angels make investments in virtually all industry sectors. Sector aside, however, it should be noted that what most attracts angels to an investment is high growth potential. Some Angels are also more flexible in their financial decisions than venture capitalists and they have different investment criteria, longer investment horizons, shorter investment processes, and lower targeted rates of return. Raising funds from business angels does not involve the high fees incurred when raising funds from financial institutions. Most Angels also has business experience and so they teaches young business entrepreneur to succeed. This free assistance and advice from an investor is priceless for young entrepreneurs starting out and would not normally be affordable by other means. Angels can be found everywhere unlike Venture Capital which is more formal to the market. Obtaining money from a business angel has a leveraging effect in that it makes the investee firm more attractive to other sources of possible finance. Angel investments certainly heighten venture capital interest in such ventures. They are also instrumental thanks to the loan guarantees they offer their investee firms, in addition to the money they personally invest.
The disadvantage of Angels Investors are less likely to make follow-on investments in the same firm. Unlike, venture capitalists spend around two-thirds of their funds on expansion funding of their existing portfolio firms. Angels also prefer to have a say in the running of the firm, which may force the entrepreneur to give up some degree of control and some may have limited expertise in running the particular type on investee firm they fund, making their contribution less value-added and more interfering. A very few Angel Investors may turn out to be “devils” who have self-serving motives for investment, rather than promoting the good of the firm. Unlike many venture capital firms, Angel Investors do not have the national reputation and prestige of a big-name institution, which can be crucial if the firm is successful enough to seek assistance from an investment bank for a private placement or IPO.
Angel Investors are risking huge amounts of money and would understandably require you to give up huge portion of the ownership and profits. Most business and financing experts suggest that you explore your options first and try to apply for a small business loan through government agencies like the Small Business Administration (SBA). But if you are willing to get an angel investor in, make sure that you and your financing partner iron out the details of your partnership before you finalize the business launching and take his or her money to fuel the start up. You can also check out some angel investors network to increase you’re to increase your chances of landing one angel as well.
More detailed information and useful advice can be found at http://www.funded.com/ Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.