Before understanding How Angel Investors make money it is important to know who is an angel, how they relate to your company , what they bring to your table and what are their goals.
Who are Angel Investors?
Angel investors are HNI(high networth individuals) who have interest in investing in small companies like Startups. Angels have high networth meaning they make $250K + per year or they are 1 million in net worth.
How are Angels related to your Company?
They provide advice in operations and get involved in your business. They play roles in operations as well as financial.
How do Angels operate their investments?
They invest alone or in Groups and prefer to invest regionally so that they can interact with their Startups more frequently.
How much funds can a Startup raise from Angel Investors?
Anywhere between $25K to 1 million USD
How do Angels Pick winners from a stream of Startups?
Demo Days - Where startups present to Investors
Contacts - Angels becomes friends with lot of investors and founders and they deals will flow on their way
Pitch - Where Startups pitch directly or at startup conferences
What are the motives of Angel Investors?
Some angels invest for social status to expand network, most angels invest for ROI, few want to be active post retirement.
How much ownership or equity does Angels expect in a Startup?
They expect 20% to 51% ownership in your company.
What are the goals of Angel Investors?
They Grow the company they invest to Series A and get VC funded.
They want sit on board as executives and provide advice in operations and facilitate connections.
How do Angel investors make money on Startups?
1. Angels Invest in cash flow companies that generates money and enjoy the outcomes
2. Through Exits- by selling companies to VC's after taking their invested company to Series A
Article from Investments & Funding Team | www.startuptimes.in
Straight From Angel's mouth:
"If a business proposal has the best plan and the best 10 page report but won't make me any money then it's not a business to me so as an investor I retreat from it."
"I do understand from running a business that it can be very hard to do a actual plan and financial forecast for a start up venture, but it's very important to lay your vision down, create a timeline, a realistic costing and financial forecast, if needed create the worst case scenario and higher performing scales, this allows you to plan for what happens if the business does not go as planned."
Quotes on Angel Investors:
‘Big companies are small companies that succeeded.’
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