Angel investors constitute a great opportunity for start up businesses. They provide necessary funding for the companies in their early stage of development. In general, as there are different types of entrepreneurs, there are also different types of angel investors. In consequence, also the expectations and views on certain things can be incompatible. Although it may seem somewhat paltry, it is actually very important to find the right type of investor, so as to avoid unnecessary disagreements and conflicts. Thus, the aim of our article is to inform what types of angel investors we can choose between.
There are 8 main categories:
Typical Angels – experienced individual businessmen who have gathered their capital throughout their whole business career. Their own rich experience is as significant for your company as their wealth. They tend to invest despite high risk and choose various industries. They can become precious advisors for the young companies in which they invest.
Entrepreneurial Angels – these are successful businessmen who run their own businesses and have a steady cash flow which allows them to invest despite of the high risk. They not only provide a great amount of capital for startups, but they also become assistants for the beginning entrepreneurs. They are usually not interested in managing a company.
Analysis Angels – they often want to receive a board position and implement the same policy they worked according to in their own successful companies. They usually do not take an active management role, unless the situation of their invested company is worsening.
Corporate Angels – the group of business executives from huge corporations who have been downsized, replaced or retired early. Generally, what they look for in investing is mainly financial benefit, but apart from this they can also see their personal interest in the investment, which is for example, getting job at the company.
Trend Angels – they are less experienced than typical angels and they eagerly invest in new technologies. They aim at bringing modern technology to the market and are not afraid of the potential risk. Some of them do not want to be actively engaged in their invested companies, since they want to avoid the whole every day process of operating a business.
Professional Angels – the group of employed professionals such as doctors, lawyers etc. who invest in the familiar fields. They can offer their invested companies professional help. They usually provide the initial capital, rarely make next investments.
Enthusiast Angel – the older type of investors (at the age of 65 and more) who treat investing as a hobby. They usually make many small investments in different companies. They do not want to engage in managing companies.
– the financial reward is of their main interest in investing. This type of angel prefers investing in the times of the market’s prosperity and stability. Numbers Angels usually do not want to be actively engaged in their invested businesses which they treat rather as a next position in their portfolio.
Who is Angel Investor? In short, it is a person who invests his or her own money in a developing company. The term is becoming more and more popular as the number of angel investors is constantly growing. The reason of this increasing popularity lies in the people’s search for better returns than those they can receive from the traditional investments. Usually, such investors earn somewhere in between $60,000 and $100,000 so they are not necessarily millionaires as it is often thought.
Angel investors come from many various working groups, such as doctors, lawyers, suppliers etc. There is a fact which makes “angels” different from bankers and venture capitalists: they are motivated not only by the potential profit. What can be this other motivator? For example, their own belief in some idea or willingness to help young entrepreneurs who they think deserve such interest. Angel investors do not often demand control in return for their involvement. They take risk to obtain a part of the business they believe in.
There are two groups of angel investors:
Affiliated – this type of “angel” knows you and your business to some extent, but it does not mean he or she is acquainted or related with you.
Nonaffiliated – such angel investor knows neither you nor your business.
In general, it would be a good idea to start looking for investors among those affiliated – it is easier to create the business relationship with those who know you and are familiar with your business. While searching consider these groups of people who can be affiliated angels:
Professionals – this group includes people who provide service for you. These are for example: doctors, dentists, lawyers etc. Their income is usually high enough to find additional investment money, and even if they are not interested, they can ask their colleagues. Arranging a meeting should not be a problem in this case and talking to people you already know is much easier.
Business associates (people you keep in touch because of your business matters) such as:
Then, there is the nonaffiliated category which consists of:
Professionals – those you do not personally know
Entrepreneurs – those who used to be or are successful in their businesses would be perfect investors especially if they know your industry
How to gain interest of the nonaffiliated investors?
Advertising – the most obvious way to get attention; try your local newspaper’s business opportunity section.
Business brokers – they know lots of people willing to buy businesses, you can try to ask for a few contact names even if you do not want to sell your company.
Telemarketing – You receive a list of some potential investors from your area and you can either call them yourself or just hire somebody to do it for you.
Networking – venture capital group meetings or other business meetings can be a great chance to get contacts you need. You can find a calendar with a list of such events in your local newspaper.
Intermediaries – these are companies which connect firms and angel investors. Their profit comes from a percentage of the amount they get for you.