What Is an Angel Investor?
While traditional debt-based bank loans are one of the better-known ways to fund a business, there are many other funding solutions for businesses seeking funding, including angel investors. According to a recent report, more than 300,000 angel investors and 400 angel investment firms operate in the United States, making it one of the most popular alternative funding solutions. So, if you need to capital to fund your business idea, should you consider partnering with an angel investor? To determine if this is a good option for your business, let’s take a closer look at what is an angel investor.
What Is an Angel Investor?
An angel investor, also known as an angel, is a person or firm that invests in high-growth potential businesses, typically during the seed stage. In the United States, angel investors must comply with the Security Exchange Commission’s (SEC’s) standards to receive accreditation. Once accredited, they are free to invest in businesses and entrepreneurs looking to a start a business.
Angel investors typically provide up to $1 million in funding per angel. Therefore, many entrepreneurs partner with multiple angels to amplify their funding. This is in stark contrast to venture capitalists, most of whom will invest no less than $1 million into a business.
Benefits of Using an Angel Investor
So, why should you consider partnering with an angel investor to fund your business? For starters, you don’t necessarily need the same stellar credit as you would for a bank loan. This is because angel investors typically seek ownership equity.
Rather than taking debt, you essentially sell part of your business to the angel, making it similar in some ways to venture capital.
This means you can acquire capital without having to jump through the hoops associated with banks and government-based financial institutions. Most importantly, though, you don’t have to pay the angel back. Assuming the angel wants equity and not convertible debt, there’s no need to pay it back.
Perhaps the greatest benefit of using an angel investor is the fact that they offer more than just funding. They also offer the advice and guidance. It’s in the angel’s best interest to help your business succeed. If your business succeeds, their equity shares will be worth more money.
Therefore, angel investors will work close with you to help identify and overcome challenges that could otherwise hinder your business’s growth. This is something you won’t find with banks and other traditional funding channels.
This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.