What is important for angel investors?

Most successful angel investors take a scientific approach and prefer data over instinct. Another important factor is to use inclusion as part of your approach. Join a group of angel investors with a diverse membership and take advantage of their varied experience to provide information on business opportunities. Investors are looking for founders who truly understand the finances and key metrics of their business.

You have to show that you have mastered all these aspects and that you are able to articulate them in a coherent way. The big advantage is that angel investment financing is much less risky than debt financing. Unlike a loan, the capital invested does not have to be returned in the event of business bankruptcy. In addition, most angel investors understand business and have a long-term view.

In addition, an angel investor is often looking for a personal opportunity in addition to an investment. Exceptional management is vital for any company. Three-quarters of respondents said that the management team of a startup company was their main consideration when investing. It is important that any entrepreneur thinking of accepting an angel investment is very clear about what the investor brings to the operation in addition to money, such as experience in commercial operations or access to good suppliers, for example.

Angel investing is a form of equity financing: the investor provides financing in exchange for taking an equity position in the company. Therefore, if you want to retain executive independence, this inconvenience of seeking funding with angel investors could outweigh the numerous advantages listed above. The effective internal rate of return of a successful portfolio for angel investors is approximately 22%. Angel investors review a variety of key issues and perform due diligence before investing in a startup.

If you get your proposal right, that's the next thing your potential investor will ask you before getting angel funding. This is why professional angel investors seek opportunities for a defined exit strategy, acquisitions, or initial public offerings (IPOs). This configuration implies less independence in business decisions and, in the case of an angel investor who owns more than 49% of the company, it means that you are no longer primarily responsible for decision-making. Angel investors focus on helping start-ups take their first steps, rather than on the potential profits they can make from the business.

Angel investors bridge the gap between small-scale funding provided by family and friends and venture capitalists. Contrary to popular belief that an angel investor is a person with a high net worth, most of them aren't even millionaires. Angel investors who create start-ups that fail during their early stages lose their investments completely. The funds provided by angel investors can be a one-time investment to help the company get off the ground or an ongoing injection to support and help the company overcome its difficult initial stages.

These types of investments are risky and do not usually represent more than 10% of the angel investor's portfolio. While angel investors usually represent individuals, the entity that actually provides the funds can be a limited liability company (LLC), a company, a trust, or an investment fund, among many other types of vehicles. Your angel investor will have a say in how the business is managed and will also receive a share of the profits when the business is sold.