Angel investors are wealthy individuals who will give an entrepreneur financing in exchange for a share of equity in the company. Investment sizes range, but usually are less than $1 Million.
Angels often times work in organized groups (Angel Group) that screen deals and invest with each other, while many invest on their own. Angel investors are more serious than the type of investor you would find in a Friends and Family Round, but they are usually less serious than a VC Firm.
Also, Angel Investor Networks such as Angellist, Business Angel Network of Southeast Asia (BANSEA), Malaysian Business Angel Network (MBAN) are springing up everywhere due to numerous stories of companies who raised angel funding in their nascent stages and then went on to achieve massive success such as Google, Amazon, Apple, The Body Shop, LinkedIn etc.
Angels normally have experience in the industry and can offer helpful guidance and introductions to their network. Because angels are less rigid than VC Firms, flexible business agreements are common.
- More likely to invest in your business in the early stages
- Can provide mentorship, valuable advice, and connections
- Less rigorous process for raising funding
- They could ask for a large slide of equity in your business at a very early stage
- You may have to give up some ownership and control – as part owner, they will have a say in how the business is run
- Some may want their money back when time is bad
Typical Sources of Angel Investors
Family and Friends: This is by far the most common source of funding for startups however, given the high rate of failure with new businesses, it is also risky in terms of the possible impact on relationships if the business is not successful. It is important to be upfront about the risk of failure.
Wealthy individuals: Another good source is successful business people, professionals and others that have a high net worth and are willing to invest up to (typically) $500,000 in return for equity.
Angel Groups: Angels are increasingly operating as part of an angel syndicate (a group of angel investors), which raises their potential investment level accordingly. Investors contribute funds to the syndicate and a professional syndicate management team chooses the investments.
Crowdfunding Platform: Can be equity or non-equity.
To date, it has allowed people around the world to raise lots of money, with easy-to-use tools that provide a smooth experience for both founders and their supporters. Whatever your reason for raising money, there is a crowdfunding site for you.