Angel investors can be described as professionals like former business associates, lawyers, doctors or even seasoned entrepreneurs that are knee on assisting the next generation. The essential aspect of these individuals is their wealth status and readiness to invest thousands of dollars to a business venture in return for a miniature involvement. Angel investors are required to satisfy the definition of accredited investors set by the Securities Exchange Commission. In addition, every angel must have at least a net worth of $1 million on top of annual earnings of $200,000. Therefore, angel investors provide money to entrepreneurs for an equity share in their company and this investment raise is filed with Securities Exchange Commission.
Types of angel investors
It is important to know the different types of angel investors as well as their categories as outlined below:
Super angel – This type of angel makes many investments. The advantage of taking money from this group is that it encompasses the feeder system that allows for financing of the following round as well as the large network of portfolio CEOs that can be tapped into for both help and connections.
Domain angel – These investors tend to be operating executives that have spent their whole careers in a certain industry. This provides them with adequate insight concerning the opportunity of a startup. Domain angels provide helpful network connections and advice.
Previous-Colleague Angel – This is an investor who has previously worked with either the founding team or founder. They are good validators to future investors and syndicate investors.
Friends & Family Angel – These investors are first-commit investors.
Grouped Angels – These are investors who have grouped together for an array of reasons.
Fellow-Entrepreneur Angel – These investors are entrepreneurs thus are knowledgeable on other kinds of entrepreneurial endeavors best. This means that they can be excellent backers for other businesses.
True Believer Angel – These angels are the kind that hears the story of a startup and instantly believe and often want to invest immediately despite financial risks.
Financial Angel – These are investors who do not invest in fund managers but instead personally do it so that they can disburse their personal money.
Sports Fisherman Angel – These individuals are mega-wealthy and invest a very small part of their net wealth in early-stage startups. The main reason for these investments is so that they have content for conversations at cocktail parties with friends.
Foolish angel – This angel investor is the blind and naïve supporter.
Angel investors can help finance ideas and dreams by bringing them to life. This is because they provide mentoring to growing firms and startups as well as seed capital in return for business shares. In this way they fuel dreams of entrepreneurs and mentor them in the appropriate direction.
How to select an angel investor
It is important for any entrepreneur to ensure that he/she is working with a long-standing investor with an excellent reputation. Select an angel investor who believes in your team rather than idea as this is the key to success.
Try to avoid friend investors as they might cost you opportunities. Instead go for experienced angel investors that has run a startup, built it or even helped it. This calls for through vetting of potential angel investors.
Angel investors are always looking for entrepreneurs that know how to execute and are self-aware. Angel investing is on the upward trend and ought to be fully exploited.