To make difference from venture capitalists, angel investors invest their own money into companies, while venture capitalists (VCs) are employees of venture capital firms that invest other people’s money (which they hold in a fund) into companies.
Knowing the sphere, where an angel investor is going to invest is very meaningful for them. They always try to invest in business or industry, they know of.
That big benefit, besides investing and fund attracting, startupper can use their knowledge. They are more-less involved in the management and interested in business growth. The entrepreneur has the right to ask questions, what kinds of opportunities exist.
The first step of “catching” angel investors is to connect to them somehow by mail or at a meeting. Mostly, it is not easy. Angel investors demand some summary of projects, the business plan that covers things like the problem, solution, market size, competition, management team, and financials. Also, they may be interested in presentations and the person should be ready for it.
Advantages of working with angel investors
- One big advantage of working with angel investors is the fact that they are often more willing to take a bigger risk than traditional financing institutes, like banks.
- As angel investors are typically experienced business people with many years of success already, they bring a lot of knowledge to a startup.
- Many startup founders are learning everything from experienced people, so having that kind of knowledge on the team is a huge advantage.
Disadvantages of working with angel investors
- The main disadvantage of working with angel investors is that founders give up some control of their company when they take on this type of private investment.
- Angel investors will expect a certain amount of involvement and say it as the company moves forward.
- The exact details of how much the angel investor gets in exchange for their investment should be outlined in the term sheet.