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.
Before a company is publicly traded on a stock exchange it remains a private equity company. Effi Enterprises is experienced in private equity financing for start-up companies and emerging companies who have not yet gone public. Even though private equity investments can be contributed to any type of company, Efraim Landa and Effi Enterprises offer private equity investments specifically to companies which are involved with developing and implementing of high tech medical equipment.
Private Equity Investing
Sometimes an individual may be a private equity investor, but generally a private equity fund is set up by a group of investors who all contribute to a private equity fund. Once the fund is established it is used to support the investment in the company. Most generally, a private equity fund is used to support a variety of investments which are used to purchase the controlling interest in multiple companies. Each contributing investor receives portions of the profit that is generated from the investments. The portion of profit each one receives is proportional to the size of their investment into the fund. Effi Enterprises contributes private equity investments in start-up and emerging medical companies.
Strategies for Investing
There is a considerable amount of strategy that is involved in making investments of this kind. Basically there are three types of strategies. One of the most common is to raise venture capital which is funds that are invested in a startup company that has a great potential and a high probability of being successful. The goal of this type of private investing is that the company will become profitable enough to eventually go public with its investing possibilities. A second type of private investing is growth capital which is invested in a more established business with the intent of helping it expand its services. And the third type of private investing is where several investors put funds together to implement a Leveraged Buyout (LBO). This is a purchase of a company that is either losing money or is underfunded. Effi Enterprises is a private investor in companies and they can also offer their expertise in the area of counseling companies on their available options.
Private Equity Investing and its Advantages
The main advantage for those who engage in private equity investing is that those who contribute are directly involved in the control of the company. They do not have to please any shareholders so they don’t have to worry about any other outside interests. Nor do they have to justify their decisions to another party. This allows the company to concentrate on their long term productivity and a more gradual build up of profits. This aspect can be advantageous to the company too. And investors are more likely to enjoy larger dividends when the company expands to the point of going public with their investments. Private equity investors earn money through their investment in private companies. And then the company benefits from the investors experience and expertise such as Effi Enterprises who can contribute business savvy which can help the company succeed.
Venture Capital is a source of funding for businesses which are just getting started. Investors provide funding for businesses that have a high growth potential. Efraim Landa is an expert at helping emerging companies locate sources for venture capital. As an entrepreneur, he understands the difficulties involved in getting a business off the ground. The company he founded is designed for the purpose of helping such companies. Included in their area of expertise in Venture Capital they include managerial as well as technical counsel.
Starting a business will take money this is certain. Office space, furniture, various types of office equipment and supplies and money for hiring employees are all some of the initial expenditures a new business should expect. There are some different ways to obtain the money for the many needs of a new business. Of course one can use resources such as personal savings or second mortgages. Bootstrapping is a common way to fund a business. This method uses a small investment to get started and then all profit goes back into the growth of the business. This method works for a business or industry where there are minimal start-up expenses and no additional employees are needed. And of course the traditional bank loan is possible. However, because each business has individual needs these options are not always the wisest or the best choice. There are certain limitations associated with each of these choices; unless of course the entrepreneur is already very wealthy.
Venture Capital is another way to meet the financial needs that are associated with starting a business. This can be a means of obtaining large quantities of finances which can help a business with start-up expenses especially for the fast growing business. Investing firms provide an investment in the business and in return they will receive a percentage of the generated profits. Generally the company who invests in the emerging company will also participate on the executive level such as taking a seat on the board of directors. This allows them to have a role in the decision making progress. For the growing company this type of experience represented on this level can be invaluable and help ensure the success of the business.
How VC Works
Before any investments are made into a company there must be a business plan in place. The business plan will carefully lay out how the business is to be run, how it will make money and how fast it is expected to grow. This is presented to the interested investors who will contemplate if the business seems worth the investment. If the VC company feels like it is a worthwhile cause they usually offer a round of money called seed money. The funding may occur in 3 or 4 rounds before the company goes public with investment options.
One major negotiating factor that is considered when an investment firm participates in VC is how much stock they will receive from the profits. This is how they choose a valuation for a company. It is basically how much they feel the company is worth. Before investment begins this is called the pre-money valuation. After the VC is received by the company the investing firm then generates the post-money valuation. The percentage by which these two values change will determine how much stock the VC firm will receive. Typically, this is somewhere between 10 and50 percent.