Angel investors can help get your business started

If you are looking to get funding for your business, but cannot get funding the traditional way, another option that you have is using an angel investor. An angel investor is somebody who invests in businesses that are just getting started or businesses that are looking to expand. Angel investors are similar to venture capitalists, but rather than forming a limited partnership with other investors, angel investors invest on their own in opportunities that they think are worthwhile.

With angel investors they are looking for businesses to invest in because they are looking to receive a higher return on their investment, businesses usually give a higher return than traditional investment opportunities. No matter what the reason angel investors have for investing in a business they are a great opportunity for business owners because they provide funding when other opportunities fail. In addition to capital, angel investors can also provide expertise, experience, and contacts for business owners to use in a specific line of business.

Before you can consider using an angel investor, you will need to know more about them, so you can understand how angel investors work. Here are some things that you need to know about angel investors.

Number one: Return on investment
Angel investors expect to receive a high return on their investments. Most angel investors expect an average of 26% return on their investments each year. When it comes to investing in businesses, angel investors expect that one-third of the investments that they make will result in a substantial capital loss, meaning they will not get any return on those investments.

Number two: Distance
Angel investors are not the type of investors that invest in business miles away from their homes. Seven out of ten investments that angel investors make will be located within fifty miles of their home or office. The reason for this is that most angel investors like to be able to keep an eye on the investments that they make, so the closer to home the investments are the easier it is to offer help when needed.

Number three: Capital
Angel investors are not usually millionaires, but they are considered wealthy. Unlike venture capitalists, angel investors come from a diverse group of people and are not as strict on their investment choices so if your business looks promising you have a high chance of finding an angel investor to help get your business started. Angel investors usually increase the amount of capital that you have to start your business by 57%. They do this through personal loans or with loan guarantees to the companies that they invest in. Most angel investors will only invest about $37,000 per business. Angel investors usually invest a few hundred thousand dollars, but they spilt it up among a variety of businesses.

Number four: Types of businesses
When looking for businesses to invest in angel investors are looking for small businesses that are just starting up. They are not looking for businesses that are considered high risk because they are looking for a solid return on their investment; they want businesses that are going to succeed, even if at a slow pace. They usually only invest in businesses that have less than twenty employees, the fewer the employees the better.

Number five: Acceptance
Angel investors only accept an average of three deals out of every ten that are presented to them. The most common reason that they have for rejecting the majority of business deals is that the business lack growth potential or the growth potential is insufficient. Other factors that cause a business opportunity to be rejected are overpriced equity, lack of sufficient talent within management, and lack of information on members of management or other key personnel.