Using angel investors to start your small business
For those of you who are interested in opening a small business you are probably already aware of the fact that in order to open a small business you are going to need to get some type of funding. Many people are aware of the traditional methods of obtaining funding for their small business, but what they might not be aware of are the non traditional ways to get funding. In fact one of the best ways to get funding for your small business is to use angel investors.
For those of you who don't know about angel investors these are people who invest in businesses. Many of these people invest in businesses because they are looking for a higher return than they would see from the more traditional investment opportunities But regardless of why they invest in small businesses these people can be a great asset to people who are trying to get started in a small business. Not only can angle investors give small business owners capital to open their small business they can also offer expertise, experience and contacts in a certain line of business. But in order to use an angel investor to start your small business you should know some things about angel investors.
Here are some things that you should know about angel investors.
- Angel investors expect an average 26% annual return at the time they invest. They also only believe that about one-third of the investments that they make are likely to result in a substantial capital loss, which means that most of their investments are going to give them some kind of a return on their investments.
- Seven out of ten of the investments are made within fifty miles of the angel investor's home or office, which means they like to fund small businesses that are close to home. Perhaps they do this so they can keep a close on eye on their investments.
- Most of the time angel investors are actually older, have higher incomes and are actually better educated than the average person, but they are not usually millionaires. The angel investors are a diverse group of people that displays a range of personal characteristics and investment behavior, which means that the chances are good that you can actually find an angel investor to fund your small business.
- Angel investors actually increase the available capital that you can have to start a business by 57%. The reason for this is that nine out of ten of the angel investors provide personal loans or loan guarantees to the companies that they invest in.
- Majority of the angel investors usually only invest a few hundred thousand dollars, it is very rare for them to invest any more than that no matter how many businesses they invest in. Generally they invest about $37,000 per small business.
- Most of the angel investors are actually devoted to small, mostly start up businesses that have less than twenty employees. In fact angel investors are actually the largest source of external equity capital for small businesses.
- Angel investors actually only accept an average of three deals out of every ten that they look at. There are numerous reasons for them only accepting three out of the ten deals but the most common reasons that they give for rejecting any of the deals are insufficient growth potential, overpriced equity, lack of sufficient talent of the management, and/or lack of information about the business owner or other key personnel.
- One of the best things about angel investors is that there doesn't seem to be a shortage of capital funds that are supplied by these people. In fact it has been discovered that the angel investors would have invested even more money, up to 35% more, if there had been more acceptable opportunities for them to invest in.