What Does it Take to Become an Angel Investor? How Equity Crowdfunding Has Reshaped the Definition.
Starting a new business can be a nerve-wracking and daunting task, built on the optimism of an exciting new venture and the fear of failure. Often, these new businesses need help getting off the ground, and that in itself can be a scary proposition. That’s where angel investors ‘fly’ in – they can provide the financial backing often necessary to bring a business to market.
Who is an angel investor? An angel investor is most often a person of high net worth who invests in new or small business ventures. They provide the capital for start-up or expansion usually in exchange for equity in the company. Angel investors invest with their hearts and their instincts. They have an interest in the business vertical, the team or how the business is solving a problem. These investors understand the bigger picture and are interested in becoming part of something they’re passionate about.
What are angel investors looking for? Angel investing can be a risky venture as startups are not guaranteed to succeed. However, there’s also opportunity for tremendous reward and the excitement that comes with being part of something from its start. Below is a list of factors angel investors may consider before joining the cause:
· Team: An angel not only invests in the company, but the people behind the company. What are their strengths? Why are they working for an early-stage business? Have they successfully launched a business or product in the past?
· Product/Service: Angel investors will certainly have done their research into the product or service being offered by the company. Is the business able to stand out in its niche market? Is there an established foundation to support the growth of the business?
· Market Strategy: What’s the company’s go-to market strategy? Is the strategy unique enough to gain appreciable traction? How will the business adapt and transition its strategy based on the market?
Can anyone be an angel investor? Until recently, the term angel investor was reserved for those with “accredited investor” status. In 2014 with Title III of the JOBS Act, the definition of angel investor broadened as equity crowdfunding portals – such as Fundopolis – have made it possible for groups of individuals to come in at the angel stage. The crowd serves as a collective angel investor. Now almost anyone can invest as little as $100 or $200 in businesses providing the funding they need to grow.
While being an angel investor has its risks, more and more individuals are turning to this type of entrepreneurial support. Whether it’s spreading the investment through crowdfunding portals or receiving financial backing from an individual passionate about the company, angel investing is one mode of support that can often translate to a business’ success.