When a person wants to become an entrepreneur and is ready with a business plan and he has carried out the market research and is confident that his business will be a successful one. Then he thinks of the capital that will be needed to just start up the business and puts in all his money, collect from all the sources like friends, relatives, family etc. but still all the money put together won’t be sufficient. He approaches banks and if that happens to be a recession then the banks won’t even let him to explain his business plan. If he approaches venture capitalist they say that the seed capital that he is asking for is too low for them and they are not interested in that particular business plan. Then enter into picture those who are known as Angel investors.
Angel investors are wealthy individuals who help the entrepreneurs during the starting phase by providing them the seed capital (in our last article about the venture capitalist we have understood that seed capital is nothing but the capital that is required and utilized in starting up of business). An angel Investor can be any one like your Friends, Family or Fools because they wont give more importance to your business model, they will give importance to the person who is starting the business. The Angel Investors are usually the entrepreneurs who like to help the upcoming businessman not only by providing the capital but also giving valuable suggestions. Some people often get confused with two concepts Venture capitalist & Angel investors, so before starting with the discussion about angel investors we will have a look at some of the differences.
These are some of the differences but it cannot be said that these are applicable to all the angel investors and venture capitalist, because the way of doing business is different from one person to another.
Following are the major types of Angel Investors;
No doubt the angel investors are more exposed to the risk because they are investing in a business just because they have a gut feeling that the business plan will work out whereas the venture capitalists invest only in those business who have got a startup and need to scale up their production (but the amount invested by venture capitalists is far higher compared to Angel investors). In return the angel investors ask for
This is one stage I must say which is very crucial because this is the stage where the investor evaluates your business, decides as to how much he is going to invest and puts forth the conditions. The last part of the previous sentence is responsible in calling off of many deals. In case of the venture capitalist one common thing observed is that irrespective of the funding that they provide they will demand 50 or 51% stake. The angel investors also do not lag behind and put some stringent conditions because the seed capital that they are providing is as important as first or second stage funding although it is less compared to first and second stage funding.
The economic downturn affected most of the businesses and angel investing is no exception to that. A study conducted by the University of New Hampshire in 2008 the angel investors in US put in $19.2 bn which is 26.2% less than their total investment in 2007 & total number of projects they backed was 55,480 a decrease of 2.9% from the previous year.
The angel investors more than often are successful entrepreneurs who have built their company and are operating successfully. The venture capitalist help entrepreneurs shape business models, create business plans and connect to resources, but without stepping into a controlling or operating role. India is one of the fastest growing economies and as a result of that not only the domestic but also angel investors from other countries are interested in investing in startup businesses in India. It was the internet boom of 1990 which made thousands of techies to move to America in search of opportunity and that’s what is happening in India now. The software industry and many other industries are growing at an exponential rate that is why it is attracting many investors. There are many angel networks like Chennai Fund, Indian Angels Network, Mumbai Angels, TiE Entrepreneurship Acceleration Program etc. There are some individual angel investors to name a few are Praveen Chakravarthy, Ranjan Kapur, Bobby Bedi, Swaminathan S, Aadesh Goyal, Anil Godhwani, Arun Seth, N S Raghavan, Kanwal Rekhi. It might be interesting for you to know that the information technology has provided such a platform for the Indian entrepreneurs that founders of international companies like Yahoo and Google seek out investment opportunities in India. The angel investment in India is on the rise and some of the reasons for that are
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