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Starting a business can be tough if you do not have enough financial capital in reserve. It is a crucial time wherein you need to invest not only time and effort, but your money as well. Most would-be entrepreneurs consider angel investors as a great option for added financing. However, it would be serve you better to first fully understand the types of angel investors, as well as how their financing can help you fulfill your dreams.
Angel investors are sometimes referred to as "business angels" or "informal investors". These individuals are mostly affluent people who extend financial assistance to those planning to start a business. It is important to note that, unlike venture capitalists that use pooled money from other people to fund businesses, angel investors use their own funds. Most of the time, the financial aid extended is in exchange for ownership equity.
Without a doubt, financing options through angel investors are usually best handled during the early stages of a business. It is important to note the different types of angel investing, so one may take advantage of the right one, at the right time, to match your individual needs.
5 Types of Angel Investors:
Corporate Angel Investors are retired or replaced business executives. Primarily, they are searching for good investments and a personal opportunity to be part-owner of a business venture. Because of this, it is only natural for them to desire to hold a certain position in the company as part of the agreement. The disadvantage of this; however, is the fact that they have the tendency to be too controlling when it comes to business decisions and operations. For this reason, the pursuing a corporate angel investor should be carefully considered.
Conversely, Entrepreneurial Angel Investors are successful business people who are able to offer larger loans and willing to take more risks because they, themselves, have stable, existing businesses. The great thing about these angels is the fact that they are also less-demanding and willing to give the new business more freedom and space/time to grow. With them, the money is entirely financial support.
You would be surprised to know that there are quite a few already successful and rich retirees interested and willing to finance new businesses – not for their financial gain, but more for their enjoyment. These Enthusiast Angel Investors do not want any role in running the day-to-day business affairs, but would rather wish to be needed and a part of something larger than themselves.
Angel investors who are known to have become rich and successful through their sheer hard work and sacrifice are called the Micromanagement Angels. These people are regarded as veterans because of their previous experiences of managing other businesses. Although they are not active participants, these angels are typically found when problems arise.
Last, but certainly not least, are the Professional Angels. These are individuals who are lawyers, accountants, or physicians willing to invest in companies that offer a product or service in which they, themselves, are experts. Their main reason in investing in these types of businesses is for them to be hired and work as a consultant for their own company.
With these different types of angel investors, do you know which one you need to call and when?