What are Angel Investors and Why They are Good for Startups?
The term Angel Investors is common among startup activists. Usually, businesses get funding in many ways, one of which is from this type of investor. Their existence helps startup business people to develop their business, such as developing products or services.
So, what is the true meaning of this type of investor? Check out the following explanation.
What is Angel Investor?
Angel Investors are people or individuals who are very wealthy and have a great net worth. Then they use some part of the wealth to support small companies by providing capital in the form of money, one of which is a Startup.
Usually, they ask for compensation in the form of share ownership from the startup they have funded. Even so, their existence is very influential.
They often comes from the closest circle of startup activists, for example, family and even close friends. They will use personal funds to provide capital for small business activists.
They are called Angels because, in the business world, they are called business angels who help small companies to grow regardless of how much profit they get later.
Types of Angel Investors
As previously stated, these investors often come from the closest people, but some don’t. You can read further explanation below.
1. Family or Friends
If the funding comes from family or close friends, they may be able to understand more if something is not doing well for your business. So, funding from family or close friends is a good thing.
2. Rich people
They may not be the closest people, but they will support your business growth as long as you have a good product. You might know them at a business event, and then they are interested in funding your business.
3. Groups or networks
To get funding from a group, you must join a community of people willing to fund your business. It would be best to expand the network of people you know.
Pros and Cons
Even though their existence has a positive effect, there are still pros and cons that need to be known and considered before receiving funds from them.
1. Pros
In terms of profits, you don’t need to worry about returning the funds given when you experience a loss in your business.
Because usually, they have considered, researched, and analyzed how much potential the startup companies they help have in the long term.
So, whatever happens to your business later, they will be willing to bear it because the decision to fund your business comes from their will.
It’s different when you borrow money from an institution, such as a bank, so it doesn’t matter whether you succeed or fail; the money must still be paid.
2. Cons
The drawback you will experience when accepting them as an investor in your startup business is that they will ask for some company shares.
It feels like they are taking over part of your company and then moving on to share decisions and control over the company.
However, if you don’t mind, you can accept Angel Investors as initial investors for your business for the sake of your future growth.
