What is Angel Investing?

Angel Investing

Angel Investing

Angel Investing is a type of private investing in which funds are invested into start-up companies. These are much smaller amounts than Venture Capital funds which can range into the billions of dollars. Generally, angel investors invest between 25 and 50 thousand dollars into a deal. Efraim Landa has helped entrepreneurs for many years now by helping them locate this type of funding for an early stage company. One of the latest trends in angel investing is where a group of those interested in private investing pool their resources and capital together to invest in start-up companies. Angel investors look for investing opportunities which can yield large returns in terms of a 10 to 20 time potential return.

Benefits of Angel Investing

As a general rule, angel investors may choose to focus more on local companies. This is not always the case, however many prefer to place these types of investment funds into a local company because this makes it easier for them to become more involved with the company. Companies like Effi Enterprises which offer these types of funding for a company will generally become involved in some capacity with the board of directors. This is so that the company can benefit from their years of business experience as well as learn from their particular areas of expertise. This helps provide stability to the company that they are investing their funds in. It is a protective move for the investor; but also helps the company become better established and solid.

How are companies selected?

Selecting companies to invest in can be an arduous task. It can take a long time for an investor to decide which of the companies will benefit most from the invested funds. Investors are very selective and many times weed out 80 to 90 percent of companies who are applying simply because the company does not meet their criteria. The other 10 percent or so can then be narrowed down to just a company or two that Angel Investors will contribute to. For this reason it is very important that the entrepreneur present a thorough business plan when requesting this or any type of funding. Once the companies are selected a thorough analysis will be made of the company. This is a lengthy process as the business must be evaluated from every possible aspect.

Investing for Returns

Angel investors will contribute to a business that they feel they can get a substantial return from. This means that it is a very tough process. The asking company must be able to establish and explain details on items such as liquidation preferences, anti-dilution clauses and board seats. Angel investors do not want to dump money into a company and walk away hoping it will turn into profits. They are making and investment of their money along with their time to help the company succeed. When the company succeeds, so will the investor. In our present economic climate it can take a longer period of time to realize substantial profits from an angel investment. So they will want to invest in a company which has lower levels of risks. Those who offer venture capital will not require as much from a business, and they will not be as involved in the business once the investment has been made.

Angels who invest in your company will take an active part in helping it succeed. Angel investing is not like a loan any other form of debt financing; it actually gives another party ownership interest in the company. An angel investor will be looking for a company with a huge potential for growth and profits. This will be an entrepreneur who has plans of expanding their businesses. Generally this type of investor will take equity in your company and then when it is sold or if it grows to the point of going public they will take their gain.

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About Efraim Landa

My name is Efraim Landa I am an entrepreneur and an expert in venture capital. I am the co founder of Effi Enterprises, a venture capital firm as well as the co founder and CEO of Gluco Vista, a company that is in the process of developing a non invasive glucose meter for those with diabetes.

Posted on June 27, 2012, in Business financing, Effi Enterprises, investing, private equity, Private Equity Financing, VC financing, Venture Capital and tagged , , , , . Bookmark the permalink. 4 Comments.

  1. My husband and I are working on opening a Bed and Breakfast in Virginia. The plantation is where James Madison was born. My husband is retired Navy and we aren’t rich. We have been running to to wall after wall looking for some start up capital. The biggest issue is that the plantation is going to be leased, but purchased. Because the real estate market has dropped our home doesn’t have the equity to use. Most microloans the fund start up businesses want you to be in business for 6 month and show cash flow. But if we were in business we won’t need start up capital. We started a crowd-funding site a few days ago, but I don’t know if we are going to get what we need from it. HELP! We know this business is going to do well. It has a lot of interest in it already. We started our blog about it a little over 50 days ago and we have over 24,000 hits already and have over 1,000 followers. Any suggestions?

    • It seems like you are doing all of the right stuff. The best advise I can give you is Don’t give up! Keep blogging, keep doing the crowd funding thing… Eventually you will get the capital you need, and when you do you will have a ready source of customers!
      Good luck! And please keep me posted on your progress.

      • Thank you! We are trying hard. We just don’t want to lose what we have work so long and hard for because of lack of funds.I know the primary downfall of most new businesses. I know you were following us on our blog and I don’t know if you have read it yet. We hope you will consider making a small donation to our campaign as we work to save our beloved outbuildings. Who knows, James Madison could have walked here.

  2. Angel investing is a very interesting concept. I didn’t know what it was, or how it differed from Venture Capital Funds before this post

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