What are angel investors?
Angel investors also known as the informal investors are the affluent individuals seeking to make the investment in the business start-ups, SMEs who have already obtained the funds but need some extra financial support. Angel investors provide funds to the new companies with the full proof business plans. Angel investors not only provide their money but also their expertise, advice and experience. The aim of the angel investors is to earn greater returns on the investments than can be earned by investment in real estate or share markets. With the ever increasing number of angel investors they have organized themselves into angel groups or angel networks. In these angel networks, the angel investors pool their money and take the unanimous decisions about the best businesses and companies to invest in so as to incur the maximum returns. It is a tedious task to get the investments from the angel investors as their screening process is very tough.
Angel investors seek for those investments which have the potential of giving 10 or more times returns in the first 5 years of investment. Angel investors provide their private funds to the start-up companies and the small and medium enterprises in return of 10-30% ownership in the company. Angel investors demand very high returns in lieu of the risky investment where there are fair chances of loss i.e. in the cases where the start-up companies fail to make profits in business.
Types of angel investors:
Corporate angel investors- These are the corporate executives from big businesses who either took voluntary retirement or were replaced. The primary goal of corporate angel investors is to obtain maximum profits but another hidden aim is to fetch a job as well. Sometimes angel investors make investment in the company and along side obtain a paid job in the company as well. Corporate angel investors like to have powerful position in the company they invest in and like to receive high returns on investment.
Economic or entrepreneurial angel investors- these are the big business owning and running big successful business. These angel investors are looking for huge high risk investments in the start-ups and small business which could yield huge returns on the investment. Entrepreneurial angel investors do not seek any commanding position in the company they invest in and are ready to make follow of re-investment in the same company.
Professional angel investors- these angel investors are the qualified acclaimed professionals like engineers, lawyers and doctors who are seeking to make investments in start-ups and small businesses. They do not seek for any position in the company and rarely make re-investments in the same company. These angel investors make investments in several companies at a time. Professional angel investors provide their own services to the companies they invest in at highly discounted rates. These angel investors seek fast and high returns, turning a little impatient at times.
Enthusiastic angel investors- these angel investors are the senior investors (age 65 and above) who have a flourishing business and like to make small investments in the small businesses to seek huge returns. Enthusiastic angel investors make the investment as their hobby and do not seek any position in the company they invest in. these angel investors make small chunks of investments in many small companies at a time.
Micromanagement angel investors- these angel investors are the self made investors who earned wealth with their own hard and sincere efforts but at the same time some of these angel investors were born with a silver spoon. These angel investors seek important position in the board of the invested company but do not take active part in the management of the company unless needed in case of company incurring loss. Professional angel investors are known to use the same strategies in the invested companies as they used in their own successful businesses.
How to attract angel investors towards making investment in the firms?
Angel investors have one basic aim and that is to earn fast huge returns on the investments. It is very important to first determine the type of angle investors most appropriate for your business and then plan your strategies accordingly.
An experienced, knowledgeable and competent management team is the first trait the angel investors look in the prospective company. The angel investors are in the look out for rapid and big returns on the investment and for that they wish to see capable, competent, reliable and knowledgeable people in the top notch positions of the company who have the correct decision making power which is essential to take the company to the new zenith and earn great returns from investments.
Angel investors like to make investments in those companies which have strong and concrete planning for the business. Angel investors are least interested in those companies who have blurred vision and do not actually know how to achieve the business goals. Angel investors like to invest in small businesses with the clear set short and long tem goals and the fool proof strategies developed to achieve the goals. Angel investors like the companies to have completed marketing planning and the crisp knowledge of the market they wish to capture with the fool proof planning to do.
Some angel investors are seeking for the important position in the company to apply their experience and knowledge to grow the company and take it to the new pinnacle. These angel investors are not solely looking for making good returns but also make their contribution to the growth of the invested company.
The angel investors like to see strong business planning to achieve promising returns on their investments.
It is of prime need to promote the business and the need for the funds to attract the angel investors. The company owner needs to talk more and more about the growth prospects in the business along with the needs for the investments for the business to take off the ground. Angel investors can be attracted by attending the business conferences, angel investors meetings and talk about the business venture in the corporate world to let the angel investors know about the business and the need for the investments to start-up.