Who Are Angel Investors? – Their Role and Overall Functions

List of Financial Services
List of Financial Services
October 30, 2019

Who Are Angel Investors? – Their Role and Overall Functions

Role of Angel Investor

No business can function without the required resources. One of the most essential resources needed for a successfully running business is ‘Money’ or ‘Investment’. No matter how amazing startup plan you have, it is nothing without a sound investment. With changing times, even a business has to change in terms of technology and products which need capital for the same. 

Not every person who wishes to run a business or is running one already might be equipped with the required investment. For the same, business owners reach out to banks, and financial investors. If you’re still looking for a new and easy platform, then you should opt for Angel Investments.

There are many people who still have no idea about what it is and what does it offer to any business. Don’t you worry, here we bring you a detailed blog around Angel Investors and their role in building a business.

Who are Angel Investors?

Angel Investor is an individual with considerable net worth who assists new and small startups or businesses by providing them required funding or capital. In this world, nothing is free of cost and that’s how an Angel Investor does this deed in exchange for an ownership equity or convertible debt.

Angel Investments could be a one-time or may also help through the starting and initial process of business. They are one of the primary reasons for the development of a new business. There are several types of Angel Investors such as Professional Angels, Active Angels, Passive Angels, and Super Active Angels.

Besides providing funds, You can also have these Angel Investors as one of your board members. This will provide your business with the much-needed experience and advantages to create an identity in the field. The lack of an experienced person could be detrimental to your business and never lead it to the top.

These Angel Investors are mostly some established entrepreneurs who have acquired enormous wealth from one of their multiple ventures. One can obtain Angel Investment for various areas of business such as Healthcare, Technology, Financial Services, and Education.

Role and Functions

A business requires help in various segments like financing, recruiting, and deciding the strategy.  Angel Investors are capable enough to support the companies they invest in several ways. Foremost, they can help in widening your network due to their strong connections with potential customers, traders, and financial institutions. 

Further, they also bring a treasure of knowledge that can be utterly useful for your growing business. Their main function is to mentor the young and intellectual entrepreneurs to create a successful business environment.

Pros and Cons of Angel Investors 

Pros of Angel Investors

Support to Startups

One of the best things about Angel Investors is their criteria for lending funds to startups. They are known to fill the gaps created by traditional lenders in terms of funding. They only ask for a good and practical plan whereas the Traditional platforms have a long list consisting of factors like profitability and familiar business models. Due to these reasons, Angel Investment is highly renowned among new business holders.

Risk Takers

Angel Investors are quite risk-takers who trust a good idea and intention behind a startup business. When applying for funds to a traditional lender, you’ll get a limited amount of funds no matter how amazing your business idea is. whereas the Angel Investors will appear as true angels who have no limits on lending funds to a new business. The only thing that matters is a good idea and intention to work hard towards the same.

Funding Eligibility

No matter what field you choose for starting a business, you’ll be eligible for getting funds. These Angel Investors are quite well-versed about various industries due to their extensive contacts across. Majorly Angel Investors belong to the field of Technology but with changing times there are other fields coming up like consumer goods, and health care.

No Periodic Payments 

When you opt for an Angel Investment, there is no need for repaying every month like one has to do in Traditional lending platforms. Here, you are relieved of the stress and you can also use your profits back in the business.  The Angel Investors are paid at the events of liquidity.

Cons of Angel Investors

Higher Investor Expectations

With unlimited funds, there come higher expectations. While Angel Investors take a lot of risks while investing a boom in startups than in result they even expect greater profits. While making an investment, anything that a businessman thinks of is profit. This will for sure keep you pressurized in order to perform well and generate greater profits.

Steady Funding Process

The funding process is quite slow and lengthy. The overall Angel Investment process takes approximately up to nine months. Foremost, finding an Angel Investor is one of the biggest tasks and takes up a huge amount of time. It is advised to make a connection that may help in finding appropriate Investors swiftly.

Difference between Angel Investors and Venture Capitalists

There are several differences among Angel Investors and Venture Capitalists such as:

Angel Investors refer to a single person who takes the decision alone regarding investments. While Venture Capitalists consists of a group of professional investors. They are also known as limited partners.

Angel Investors are majorly known for investing in new startups that can also be considered as the early stage of business. Whereas the Venture capital firms do invest in early-stage companies but are also interested in developed companies.

The Angel Investors are focused on providing funds to inexperienced and new entrepreneurs whereas Venture capital firms believe in finding the best business and investing in one of them.

Wrapping Up

Angel Investments are a great option for someone who is planning to start a new business. They can be a big support in funding your business and helping it to grow further. We hope this article will help you in understanding the role and importance of Angel Investors.

If you have any suggestions or feedback, Do let us know in the comment section.

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