What is an Angel Investor?


The term angel investor probably sounds like an oxymoron--something heavenly and charming, yet something as odious as money and investing. True, the term does need a bit of explaining. Understanding the term and realizing the potential can be a huge asset to your work-at-home business.

Angel Investor Defined

An angel investor is basically a very rich person who gives her money to small start-up companies.

Why "angel?" When starting a company, possessing the funds to operate is essential. Like an angel, providing help in time of need, an angel investor furnishes the funds when you need them most. Besides the warm-and-fuzzy connotation of the word, it does have a historical background from Broadway, describing affluent art-lovers who privately funded Broadway productions. Unlike venture capital firms or monster-like investors or firms, angel investors give money, rather than attempting to exercise autocratic control or vying for seats on the board of directors. However, they may volunteer their expert insight and business acumen as needed.

Why "investor?" As angelic as she is, an angel investor is a bona fide investor. In return for the infusion of capital, a remuneration of some sort down the road is expected. Usually, this is rewarded in the form of stocks, or some form of equity in the firm.

Understanding Angel Investors

Angel investors are not to be found in financial institutions, quick cash shops, or big-name banks. Usually, angel investors are personal contacts--people with whom you have  an existing relationship. In fact, many times, angel investors are friends or family members. Obviously, they have quite a bit of money. Think rich-uncle-type people. 

Angel investors are risk-takers. Sure, they have money, but by giving a lot of it away, they are taking a big risk. Savvy as they are, they expect a return. This demands their confidence in the startup firm they are funding. Most angel investors play in the arena of technology, where the risk and reward factor is high indeed. Since most angel investors provide around a half million dollars in startup funding, they expect eventual returns of 10-30x return on their investment.

Besides being financially successful risk takers, the typical angel investor is often a retiree who can't restrain the passion for business. Many angel investors have a background in high-risk business or entrepreneurship. The entrepreneurial nature of angel investors is what compels them to invest in the same style of startup.

Approaching Angel Investors

As an entrepreneurial work-at-home mom, you may be interested in cashing in on the value of an angel investor. Here's what you should keep in mind:

  • Have a good network. Know people. Network with professionals. Besides maintaining a strong online presence, visit investor conferences and networking meetings.
  • Have a good idea. The idea is only the beginning, but make sure it's a good one--strong, leak-proof, structured, and potentially lucrative. While it is sure to be somewhat risky, it must at least be on the verge of genius, if not sheer genius.
  • Have a powerful plan. Ideas get off the ground with plans. After strengthening the core of an idea, roll the snowball of a business plan. Pack your plan with specific strategies, marketing techniques, management team members, and a neck-saving exit strategy in case of a failed attempt.

Angel investing is an exciting and ever-changing arena in which to play. The volatile nature, the risk/reward, and the passion for excellence characterize the game. Understanding this business model and engaging it could be in your future, the future of your business and the future of your career.

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