Angel Investors – Specialties of Angel Investing
With each passing day, it is harder to get hold of seed capital. For entrepreneurs with fresh and innovative ideas that have the potential to be very profitable and possibly even change the world, nothing can be more painful that being stuck with a shortage of funds. For startups, angel investors come as a boon and it is a fast and easier way of getting investments for your projects as compared to many other traditional forms of fundraising. This is one of the best fund raising ideas, and you should read on to know why this is so.
What is Angel Investing?
Simply put, it refers to a procedure of getting funding for business from Angel Investors – well-to-do people who are enthusiastic about making investments in start-up ventures. Such types of investments are generally an alternative to convertible debt or ownership equity. A convertible debt, for those not aware of the term, refers to a bond with a more than 10-year maturity term. This can be transformed into cash worth or shares of the issuing company. Some of the biggest companies to have received funding from angel investors include Google, Facebook, Skype and Twitter. Clearly, it is one of the popular fund raising ideas and best ways to raise money.
What are the Specialties of Angel Investing?
Apart from the funds offered by angel investors, valuable connections and advice are also acquired by entrepreneurs – which can assist them in developing their business. Investors Circle, Golden Seeds and Tech Coast Angels are some of the main angel investing networks out there.
These types of investors usually expect to get back about 30% returns from the private portfolio of their firm. However, you should note that you cannot just offer an average ROI of 30% to an angel investor, considering the fact that the majority of angel investments fail to get any returns on investment. Due to this reason, if 50% of their total investments bite the dust, they would require earning as much as 60% returns on successful investments in order to ensure an average return of 30%. For entrepreneurs however, it is one of the best ways to raise money.
It is also important to remember that in some of the angel investments, profit sharing or dividend payments can be earned by angel investors over a period of time. Sometimes, these investments are organized in the form of convertible promissory notes. These are nothing but loans having a fixed rate of interest. When matured, these can be redeemed for stock shares in a firm or cash. Basically then, these are loans which can be transformed into equity.
Keyword: angel investors, fund raising ideas, ways to raise money
