What is an Angel Investor?

From the common questions we receive through our customers, we often focus on what is an angel investor. In short, an angel investor is in individual that typically has a significant amount of wealth that is looking to invest in a local based business that it has a strong potential for substantial growth over a five-year period. As we will continue to discuss time and time again, most angel investors are looking to make a direct investment into your business as it pertains to the anticipated growth rate for the for the company that you're looking to start or have already started and are looking to expand.


This discussion with a focus on the nature of what is an angel investor and how you can obtain a potential equity investment from this individual or group of individuals. As we discussed in some of our previous articles, one of the most common factors among angel investors is that they have already been successful in their business ventures and are now is seeking to invest in new businesses that are located within 25 to 50 miles of where they live while concurrently looking to make an investment of $50,000-$250,000 for the interesting investment have found in your business. As mentioned previously, an angel investor as it pertains to the demographics of angel investors is that they typically do have a net worth ranging from $1 million-$5 million and are prepared to make that investment of $50,000-$250,000 into your business.


In most circumstances the angel investor typically also generates an income for themselves between $250,000 year to $1 million per year by an ongoing basis. As such it is important your member this as you seek out angel investment capital so that you're able to appropriately approach an investor that is prepared to make a significant amount of investment into your business during the time that you are looking expand your company a five year time horizon. We strongly recommend, that you purchase our angel investor information toolkit so that you can effectively develop a business plan that will showcase your business to a potential angel investor or angel investor investment group so that you can obtain the capital you need in order to develop further expand your business operations.


This is going to again be one of the common themes that will discuss as it pertains to angel investment capital. As we discussed in some of our other articles, and angel investors, specifically for your business, are very well versed in the industry that you're operating within and is seeking to make a localized investment as it pertains to developing your business further. Additionally, this particular individual or individuals are seeking to provide capital to a business that will produce a substantial return on their investment. In that some of our future articles, we are discuss the guidelines as it pertains to raising capital from an individual angel investor so that you can make sure that as you progress through the operations as it pertains to raising capital you are in a good space for ensuring that you are a candidate for angel investment capital.


As we discussed for many people turn to angel investors, or a group of angel investors, whether seeking capital in order to launch a new business venture or in order to expand an existing business concern. This is primarily due the fact, with the current economic status as it is, many banks and traditional funding sources have stated away from providing new capital to businesses even if they have a fantastic concept or are a business that is already in operation and can generate a significant amount of profits. As such, seeking out angel investor capital may be in your best interest as it pertains to obtain the financing need to aggressively expand your business operations over a five-year time n. Some that angel investors are willing to go as long as seven years or 10 years as it pertains to their investment in your company. As such, you should keep this in mind as you continue to seek out angel investors for individual investors to provide you with the financing you need in order to expand your business operations. In one of our previous discussions, we also focused on the issues pertaining to valuation of your company not only as if not only is a startup business but also as good as it were an existing business that is able to move that is currently generating a significant net income and simply needs additional capital in order to expand appropriately. For many businesses, there are banks are willing to lend to enterprises that are very promising and can produce a significant amount of positive cash flow that would support any type of debt obligation. As such by working with an angel investor you may be able to find yourself in a position where you are able to obtain the capital that you need at a relatively low cost while currently maintaining a significant amount of control over your business.


Of course, it goes without saying that any angel investor that is willing to put up a significant amount of capital for your business is going to want a significant equity percentage in your business in exchange for the capital that they are providing to you and your company. Again, one of the things we need to consider immediately if you have a potential angel investor in mind is that you are able to effectively have counsel in place that will assist you during the negotiation operations. Unlike a bank loan, the issues pertaining to negotiations as it relates to raising angel investor capital are tremendous. This is primarily due, again, the fact that he each individual angel investor or angel investor group that you work with has different expectations as to what investment they are seeking when they decide to make an investment into your business. One of the things that you can do in order to further your advancement in your business while currently generating the capital that you need is to have a valuation completed by a certified public accountant so that can provide you with a future valuation as well as a current valuation as it relates to the value of your business and what and angel investor or angel investor group is buying into as it relates to your organization. This will help you substantially as you progress through your capital raising operations because as angel investors focus substantially on a valuation has been completed by a CPA. As they see this, they will be able to further understand how much equity that you're willing to give up in exchange for the capital that you're looking to raise funds and angel investor. However, it should be noted that having a valuation completed on a pre-launch operation basis for on a basis can be an expensive endeavor. You can anticipate that business valuation will cost anywhere from $500-$5000 depending on the scope and scale of your current or anticipated operations. However, by doing so you will be a much greater position when negotiating with potential angel investors for the capital that you are seeking to expand your business operations. Although it is very expensive, we do strongly recommend that you do have a valuation completed as part of your overall business plan when presenting to an angel investor or angel investor group. This will ensure that you are getting a fair value for the work you've put into your business. If you have an existing business in place, you can ensure that you are not selling too much of your equity in exchange for the capital you're seeking in order to develop or expand your business. Furthering  this discussion, again, the things you again need to focus on as a small business entrepreneur that is running a small or medium-size business is the valuation of your business on a regular basis. Most angel investors or angel investor groups sole purpose of investment is not for generating income through the company but also with the anticipation that will be able to sell the business for significant earnings multiple once you (and the rest of your Management Team) have decided to move on to a different project or we simply decide to retire. As such if you have an appropriate valuation plays he will be in a much better position as it pertains to requiring the angel investing.


In the future discussions we are going to focus on issues as it pertains to looking for angel investors, working with angel investors, and developing a valuation strategy that allows you to effectively negotiate with individual angel investors or groups of angel investors. As you will see, angel investor are primarily concerned with the most value for your business as you sell it to a third-party in due time. In many of other discussions will also focus on the usage of small business investment companies (or “SBICs”) as it relates to acquiring capital from SBA licensed investment firms. This is especially true if you have a highly unique business idea for a new piece of technology developed in conjunction with your business operations.


We look forward to produced providing you with additional information that will assist you in your capital raising efforts and we certainly hope that you enroll in our new program that we've developed through TheFinanceResource.com as it pertains to locating angel investor capital, business loan capital, business lines of credit, and venture capital so that you can further your business operations. We also hope that you will to acquire our newly developed guide as it pertains to raising angel investor capital so that you can further your operations without selling up a substantial portion of your equity.


Thank you again for tuning in and we look forward to seeing you in the future as we continue our discussions as it pertains to raising capital especially from angel investors.