Angel investment is a form of early-stage investment where High Net Worth Individuals provide funding to startups in exchange for a stake in the company.Angel investors provide support to startups in very early stages. In addition to funding, they may also provide insights on strategy, lend their expertise and experience to ensure the success of the business. But what do these angel investors get out of this investment? Here’s a breakdown of how angel investing works.
Benefits of Angel Investing for Startups
The most obvious benefit to startup founders is, of course, the funding. Angel investing is a risk-free, collateral-free source of capital that usually comes when it is most desperately needed.
Unlike most other sources of finance like bank loans, money from angel investors doesn’t need to be paid back if the business goes belly up. Angel investors can also offer insights into how to better manage finances and increase profitability.
Angel investors are highly experienced, successful entrepreneurs. Their investment in the startup is usually not limited to just finances – they usually also offer strategy guidance and business management tips to inexperienced founders.
This kind of mentorship can sometimes be more valuable than the capital itself – angel investors don’t just give startups money, they teach the founders how to use the money as best as possible.