Angel Investment

The new digital age entrepreneurship have come a long way from traditional start-ups especially in amount and kind of investments needed. Looking at history of technology firms it is apparent that it takes comparatively lesser investment than previously to start-up a business. Just about 25-30 years back, it was evident that the initial technology product making companies required much more than a sophisticated team of software experts. In addition, if one was resorting to in-house manufacturing, it meant a factory, sales force, supervisors, workers etc. This entire infrastructure was needed before winning a single customer. Thus, this paved way for venture capitalists to step in for provision of initially huge amount of investment, experienced senior executives and other advisory roles to avoid any gross mistakes.

However, the world has come a long way and now massive businesses (products) like Facebook and Twitter although are risk-intensive and also required a decent investment but are different in a way as they don’t involve too much capital and a traditional board of members to run the show.

Angel investors as against venture capitalists are wealthy individuals who invest in people and their ideas than typically putting-in money to fund the start-up. This means that they don’t demand board memberships and neither do make huge capital investments. These investors bet on ideas and if they feel the idea will click they invest money on it. Even though they are available to the entrepreneur for any advice but don’t spend much time on such issues. Their focus is to help the business succeed and not profit-making.

Angel investors come together and form groups or angel networks for sharing knowledge, research and pooling their investment capital. These are most retired entrepreneurs or executives who have gained great experience in their active work-lives. They are increasingly entering the area to support the young generation of entrepreneurs to keep track of the latest developments in a business area, to mentor these young minds in a way so they fall into honey traps and learn from their experiences etc. As they are generally known to the entrepreneur so the angels also at times provide information about valuable contacts to them.

There is no fixed amount which these investments invite but it can range from few thousands to few millions. They thus bear huge risks but are confident of good returns as they pick only the best ideas. These investments are mainly done in start-ups which operate in the following sectors-internet, healthcare, mobile & telecoms, electronics etc. Studies have shown that the best value for any angel investment is 2.5 times the initial amount despite the possibilities of a positive return being less than 50%. To keep on safer tracks, they generally diversify their investments by pooling in multiple firms.

Tags: , ,

Advertisement

Comments