Role Of The Angel Investor: Industry Knowledge And Leads
An angel investor is an affluent individual, who has the capability of taking that risk with money and investing it in a start up or any business. The role on an angel investor is huge in providing finds for start-ups and other businesses. Many angel investors today form a group or are a part of an investors’ group or angel networks as well call them, wherein they can research, share and pool in their investments. There are different kinds of angel investors like business angels, corporate angels, professional angels, entrepreneur angels and latent angel investors. Angel investors have the capability of providing more financial help to new business owners than traditional avenues.
Angel investing can be a very thrilling participation, and the role of an angel investor increases with each involvement in the firm’s business, but many people who plan on taking the leap into such high risk investing do not fully understand what they are getting themselves into and escape out of the complete benefit of the whole experience. Not only can this lack of realizing limit the potential disburse if the organization scale and succeeds, it also forbids the proper consolidation of expertise and knowledge which should come forth from such arrangements.
The role of an angel investor is not easy because in angel investing, the idea that you would lose or fail about 80% of the time, that you are going to either lose all of your money or most it or make a little bit, for the energy and efforts you put into the venture is not really acceptable everybody.
A lot of angel investors today join various angel investment networks and thus the angel investors have a big role and reason behind joining it. The main reason amongst the many is the ability and power to share their knowledge, skills and experiences while saving upon time. The diversity and variety of knowledge and experiences by angel investors in a lot of various vertical markets can be of a huge value when an angel investor, as a part of their role contribution, considers investing in a business which is a little unfamiliar or unknown for that matter. Angel investors’ role in all the start-ups is crucial as they invest their own private money and thus they have a bigger risk to lose money than the people managing the wealth of others. Yet another advantage of an angel investors’ role in a firm is the access to enhanced deal flow. An angel investors’ role is again very unique as he can be even more selective and go after only those opportunities and chances that stimulate his interest. A lot of angel investors’ role is moving towards joining various networks and angel investors’ today join groups for the good fellowship of like-minded people. A lot many angel networks charge an annual fee to cover up for the cost of various meetings and due application among various other expenses. A few angel investments networks need a specified investment amount over a certain period of time along with a work requirement.
One of the mistakes made in playing the role of an angel investor, a mistake which an angel investor can make while angel investing is to overestimate the skills and experience of the entrepreneur.
When an angel investor deals with entrepreneurs during the start-up stage, they are dealing with them in the role as a visionary. Now what angel investors’ are doing here as a part of their role is that they are actually asking the entrepreneurs to carry out a plan, keep their nose at the edge, not to goof up too often and ask for as much help they want. That execution is by far and away the greatest reason that companies fail.
During the early 1980’s, the role of angel investor’s was not easy because it was not an easy way out for angel investors and they just couldn’t find interesting deals, so they used to work through a close network of friends to get to good deals. The rise in the role of angel investors and of angel investors organizing themselves into groups in the 1990s has lead to a lot of improvement in deal flow, due diligence, negotiating term sheets and mentoring companies. People today tend to self-select after they see what is involved, who all are there in the group and the people who generally tend to stick around are the exited entrepreneurs and the retired business people.
Skills & Experience of an Angel Investor
An Angel Investor should have a good business and management experience and contacts in your area of expertise. With their business experience they’ll be more likely to be able to make a reasonable judgement about whether the company wanting money is likely to succeed or not. An angel investor as a part of their role thus would also be able to contribute more to the management of the company. If their business experience is limited, it will be more sensible for them to seek to invest alongside people who are experienced, in a consortium. According to a research, on average an angel investor spends about 10 hours in a week on the company’s matters and affairs. It would evidently be helpful if their skills and experience are complementary to the existing skills set in the business.
Angel investors with their important role, bring the much needed experience and skills to a business, especially during the important early stages of development. Due to the risks of investing in early-stage or start-up enterprises with no proven history of success, angel investors would often ask for a high return on investment to compensate for any losses.
To summarize it all, the role of an angel investor is good if they provide you with valuable contacts and experience along with their angel investor funding to your business. Angel investor’s role gets most essential because in the end, they can provide and help you with contacts and mentoring and they are distinctively as invested in the success of your business as you your self would be, all of which can have substantial and healthy benefits.