Are you desirous of being an angel investor? Are you in search of how to get started with angel investing? Do you want to know if you qualify as an angel investor? Well, if you fall into any of these categories, you are at the right place where you will get answers to your questions and even find out more information about angel investing.
Who Is An Angel Investor?
Angel investors can be referred to as individuals that offer to provide funds to support the capital required for the success of a promising startup company and they receive a share of the company in exchange which serves as a form of royalty.
Some angel investors invest in businesses at the seed level that is when it still exists is the mind as an idea, on a paper and yet to physically materialize while some get involved at the point the company is already taking its shape.
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These investments are often required for the stability and consistent growth of the business.
Angel investors may be experienced entrepreneurs, professionals from fields such as lawyers, accounts, doctors, and many more, all aimed at moving the next generation forward.
How To Become An Angel Investor
To become an angel investor for startup companies requires that you meet up with certain conditions. These standards will be discussed and then you can know if you qualify to operate as one.
This is essential and many entrepreneurs look forward to investors that meet up with these standards because it helps the startup businesses to be exempted from several securities filing with state securities regulators and SEC. Therefore to be a certified investor, you must;
Meet Up With The Minimum Income Level
For persons who are interested in becoming angel investors for the upcoming companies, you must have a net worth of a million dollars, an annual income of $200,000 or $300,000 jointly with a spouse excluding primary home.
Helping individuals to start up their companies requires that you get adequate knowledge by making research on the matter in question. Meet and ask questions from experienced investors who have shreds of evidence to show.
Understand The Risks Involved
Although an individual stand the opportunity of enjoying benefits attached to being an investor, yet the cons that come with it, are capable of frustrating the entire benefits.
There are several instances where investors lose a larger portion of their investment while in some other cases, the entire investment is lost.
How To Become An Angel Investor With Little Money
For you to become an accredited angel investor, you need to be wealthy having a net worth of a million dollars, an annual income of $200,000 or $300,000 jointly with a spouse excluding primary home.
In situations where you are unable to meet up with these requirements that will help you to match up as an accredited investor, some alternatives have been made available for you
This is one of the crowdfunding platforms that gives opportunities to individuals that desire to become angel investors but have little money as compared to the minimum amount required for them to qualify as an accredited investor. It allows investment of as low as $1,000
This is an angel investing platform that allows non-accredited investors or investors that have a little amount to spare for investment to help contribute to the capital of starting businesses.
WeFunder allows participants to invest as low as $100 in reliable and promising companies although a very insignificant share of the company will be allotted in exchange but will encourage interested persons to get started with angel investing.
Risks Involved When Investing In Startup Companies
Both investors and intending investors in young companies must always prepare for the worst scenario no matter the high hopes of the company in view. This is because, despite the preparations already made for the smooth running of the company, there may be several unforeseen circumstances that can ruin all that.
Being well prepared for the worst situations will be the guide in making the right and safest investment decisions.
Some of the risks that can be faced as a result of investing in young companies include;
Little Or No Return On Investment
This is an aspect of risk you must prepare for when you want to get started with angel investing. Although one of the sole purposes for investing in promising companies is to get returns on investment. Whereas, returns may turn out in any of the following ways.
- Take years to materialize
- Maybe very little
- May be irregular
- May never happen
To have these expectations in mind is to save you from the regrets that may spring up if it happens.
Mismanagement Of Available Resources
The mismanagement of a company’s resources can be in the area of fraud or the employment of inefficient and inexperienced manpower. Whichever way it happens, it will rub off on the funds invested.
This can be referred to as a self-inflicted challenge by the company and so as an intending angel investor, you must make adequate findings of the efficiency of the management of the company
The management also may be fraudulent in their activities which will also affect the outcome they produce.
Total Loss Of Capital
This is the highest height of loss a young company investor can be faced with. This means that before you commit your resources to any company, you must be prepared for the worst situation of losing your entire investment.
Pros Of Being An Angel Investor
You do not have to be discouraged by the challenges associated with angel investing because there are investors who have contributed to the growth of startup companies and have been reaping and enjoying the rewards that resulted from it.
Some of the opportunities that await angel investors are;
Avenue Of Building Future Wealth
Angel investors that are willing to part away with a huge amount in the early life of a business often receive a good share of the company. If the company succeeds, it becomes a source of wealth that they continue to draw from as long as the company exists.
Being A Part Of The Journey
To share in the growing process of a company tends to create a bond between the builders that is, both the owners of the company and investors. This could create better opportunities beyond the ones estimated.
Opportunity For Diversification
Putting your finds in other businesses asides from yours tends to build a wall of security around you both in the present and future because your business fails or is challenged, you will have other sources to fall back on.
It is obvious that for a company to survive beyond just being an idea, it requires funds, this gives opportunities to those who have the funds to make investments and reap from these investments once the company begins to make tremendous progress.
Being an angel investor will make you help other businesses grow while you will also benefit from this growth as it comes. Having gone through the details on how to get started with angel investing, start strategizing on how to help build other promising companies while also building an unstoppable flow of wealth for your future.