ANGEL INVESTOR STRATEGIES FOR THE ENTREPRENEURIALLY CHALLENGED: ANGEL INVESTOR VS VENTURE CAPITAL.

ANGEL INVESTOR STRATEGIES FOR THE ENTREPRENEURIALLY CHALLENGED: ANGEL INVESTOR VS VENTURE CAPITAL.

What Is Angel Investor:

Entrepreneurs who have an idea, but lack funding, are supported by angel investors. It is only after investors understand and analyze the startup’s business model, founder, team, and entrepreneur’s planning that they are ready to fund the startup.

In addition, Entrepreneur Angel lets investors know when and where they need funding. Along with this, he has to enumerate the advantages of his startup to the investors, how his business model can work in the market and there is no one like him in the market.

It is like a monopoly situation. Angel investors basically invest in such startups, in which they get 10 times profit after investing their money. They start with a small investment and quickly fund it by taking a stake in the company with the aim of increasing that investment. Their annual income is good, or they can say that they are very strong financially. They are also called private investors, seed investors, and angel funders.

It is often seen that angel investors are from amongst the family and friends of the entrepreneur. It also happens that angel investors invest funds once in a company, so that the company can overcome the initial problems and grow its business by getting off the ground firmly. Note that angel investors never fund real estate. They mainly select startups related to technology.

 

Difference Between Angel Investor And Venture Capital:

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  • Angel Investors are individuals who invest in a new venture or startup. It can be any wealthy person or successful businessman. Those who invest their own money in new ventures. Venture Capital is the investment of money by a farm or company into another new venture or startup. Such form or company earns money from investors by way of stake in any fund and spends it on buying shares in the private company i.e. holding private equity.
  • Angel Investors are personal individuals, so they invest their own money in the venture. Whereas venture capital is a firm or company, so they invest the money of other investors in some new venture.
  • The ability of Venture Capital to invest in any venture is much more than that of an Angel Investor.
  • Angel Investor is a personal person. The same Venture Capital is a form or a company.
  • Angel Investors are eager to invest money in a venture, often in its initial stage, in the start-up business. Venture Capital, on the other hand, is less in the initial stage while they are ready to invest money in an established enterprise.
  • The Angel Investor can expect good returns from the investment and share in the ownership rights of the company. Whereas Venture Capital demands a seat on the company’s board.

How Do Angel Investors Funds Startups?

First, there is a pitch meeting. In this, the entrepreneur explains his idea and tells about his meeting. This is followed by several rounds of more meetings in which the angel investors understand the entrepreneur’s plan in detail.

Angel Investors then understand the authenticity of the entrepreneur’s model, learn about their team, and then decides to fund it. After this, the term seat is seen, in which the terms are written that the investment will be made in the startup under such and such section.

In this, it is decided how much equity the angel investor will get when he invests. Suppose he has invested 4 crores, then how much equity will he get up to 15 or 20 percent or not. In this, it is also seen that at what valuation is being invested. After this, the chartered accountant is asked to check the legal due diligence of that company. Angel investors are ready to pay money only after this process is completed.

Funding Sources:

Angel Investors usually use their own funds. In contrast, another type of entrepreneur keeps pooled money from multiple other investors in a strategically managed fund.

Although Angel Investors represent individuals, the funding unit may be a limited liability company (LLC), a business, a trust or investment fund, or something else.

How Do Angel Investors Benefit From Funding?

There are 3 types of exits in startup funding. Meaning it is called exit, which buys the shares of angel investors.

Like we have a 20 percent stake in a company. After this, new investors keep coming in and buying back the shares of small investors. Such Angel Investors, who are old, get profits of up to several hundred times. Talking about the second method, where the corporate company buys the startups.

When big companies like Tata, Jindal buy shares of old Angel Investors, they get benefits. The third way is, that if the condition of the company is not good, then merge it with another company, so that the company is not closed and the shares and money are also returned.

 

Summary
ANGEL INVESTOR STRATEGIES FOR THE ENTREPRENEURIALLY CHALLENGED: ANGEL INVESTOR VS VENTURE CAPITAL.
Article Name
ANGEL INVESTOR STRATEGIES FOR THE ENTREPRENEURIALLY CHALLENGED: ANGEL INVESTOR VS VENTURE CAPITAL.
Description
Entrepreneurs who have an idea, but lack funding, are supported by angel investors. It is only after investors understand and analyze the startup's business model, founder, team, and entrepreneur's planning that they are ready to fund the startup.
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BizBale

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