Angel investors are usually wealthy individuals who invest in startup companies and entrepreneurs. The aforementioned investments usually come with the expectation that the "angel" will receive his or her money back (and then some) as the company takes off. In some cases, the investments occur simply one time; in other situations, the "angel" may make repeated investments.
Investing is one of the most common ways for people to capitalize upon their wealth, thus earning more of it. However, there are usually certain stipulations and requirements for individuals who wish to become angel investors.
Secure the Proper Resources
Contrary to popular belief, becoming an angel investor is more complex than simply throwing large sums of money at businesses which are likely to succeed later on down the line. According to
, angel investors are required to have a net worth of at least one million dollars, notable assets, a minimal yearly income of $200,000, considerable, professional investing experience, and liberal amounts of time.
Another critical skill for angel investors is good judgment. Many entrepreneurs have ideas and ambitions, but a plan for execution is paramount. Learning about the background, vision, experience, and finances of the company founders will provide insight into whether or not an angel investor can expect to yield profit from their initial investment.
Be Willing to Take Calculated Risks
Approximately 50% of startup companies go out of business within the first few years of their inception. For this reason, angel investors should carefully consider which enterprises they want to put their money into. Moreover, "angels" should not invest money which they need for other purposes, such as retirement, savings, etc.
Patience is yet another virtue for any successful angel investor. In many cases, it takes years for angel investors to see a return on the funds they put into certain companies. Hence, individuals who expect to see immediate gains and profits should steer clear of angel investing.
A Final Word
One of the most critical things to remember about angel investing is the fact that there are no guarantees. While one "angel" puts hundreds of thousands of dollars into a company and regains millions over time, another "angel" could invest just as much money only to lose it all to an enterprise which ultimately fails. At the end of the day, this form of investing all comes down to evaluating the business and ultimately deciding whether or not making a particular investment is worth the capital.
Authored by Gabrielle Renee Seunagal