Angel Investors

Finding an angel investor

For many start-up companies, an angel investor is as heavenly as the name implies. An angel investor is someone who puts up a substantial amount of money to help fund a new business. This is often done in exchange for stock or a part of the ownership.

However, not all angel investors are philanthropists—in fact, most are in it to find promising new firms and business leaders who can build strong companies and help the investor gain a substantial return. In many cases, angel investors were once promising young entrepreneurs themselves and believe they can spot profitable business talent. They will also sometimes form what is known as angel groups, to pool their funds and increase their chances of finding potentially profitable ventures to invest in.

Private angel investors are by no means new, and the term actually originated during the rise of American corporations in the early 20th century. In fact, the original angel investors spent their money to produce Broadway productions, at a time when wealthy businessmen wanted to watch something entertaining and turn a profit at the same time!

Getting Help from an Angel

The funding from an angel investor can vary widely, and often depends on the business target as well as its potential cash flow. Typically, investments range from about $100,000 to over $1 million. Most angel venture investors are in their late 40s, make about $100,000 a year, have college degrees and have a net worth of $750,000.

The process of finding angel investors is becoming easier: according to the Small Business Administration, over 250,000 angel investors are now active in the U.S., with the number growing all the time. This does not, however, mean that they will invest in just any idea, company or individual. Those approaching a wealthy investor always need to demonstrate that their plan for a successful company is sound and has long-term sustainability. Unless an angel investor is sure they can get their money back and more, it's highly unlikely they will invest in a start-up firm. If commercial lending is proving hard to secure, a company's chances with an angel investor may not be much better.

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