Angel Investment

Angel Investment

One of the most common ways to find new financial resources for start-ups is Angel Investment. Angel investors are wealthy individuals. They invest their money in the very early stage of start-up, even if it is difficult to measure project benefits. Their investment plays a huge role in the formation of future companies.

In order to be an angel investor, according to the Securities Exchange Commission (SEC), a person must:

  • Have made at least $200,000 a year (or $300,000 for a couple) for the past two years
  • Have the expectation of making that amount again


  •  Have a net worth over $1 million, alone or together with a spouse (excluding the value of the person’s primary residence)
Angel Investment

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.

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