What is Angel Investing?

India have a historical and mythological background of business. Still it lacks in comparative ratings across entrepreneurship, innovation and ease of doing business.

Reason being the adoption of old and outdated rules and regulations which provides hinderance to our business environment for long time. In spite of having a good potential for expansion, an organization remains behind the curtains.

But now the time is changed. Today every new and existing business wants to grow globally. But this requires time, as it is the only master of everything.

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The path of new companies or startups are not easy. Every business needs financial help to grow. But this is now possible as many organizations are there for assistance to new companies. These organizations are called Angel Investors.

(Source: Google)

Angel Investors invest in small businesses and startups. Often angel investors are among an entrepreneur’s family and friends. They can also be a Limited company, trust or an investment fund organization.

How they works:

They provides capital for business startupsĀ in exchange of convertible debt or equity. Angel investors provides more favorable terms as compared to other lenders, since they invest in entrepreneur starting the business rather than viability of business.

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A small but increasing number of angel investors invest through ‘equity crowdfunding’ or organize themselves into Angel groups or Angel Networks to share resources and pool their investment capital, as well as to provide advice to their portfolio companies.

Angel investors and Venture Capitalist:

Angel Investors are opposite of Venture Capitalists. They focuses on startups to let them take their first step, rather than possible profits they may get from business. Venture Capitalists generally invests in a possibly profitable or capable company. But Angel Investors do not really care about it.

Angel investors typically invests their own funds, unlike venture capitalists who take care of pooled money from many other investors and place them in a strategically managed funds.

Today’s Concerns:

Angel Investors bears extremely high risks and usually subject to dilution from future investments rounds. As such they requires very high return on investment. So the professional angel investors seeks investments that have potential to return at least ten or more times their original investments within five years, through a defined exit strategy, such as plans for an Initial Public Offering(IPO) or an acquisition. While the investor’s need for high rate of return on any given investment can thus make angel investing an expensive source of funds

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