So you’ve made it; from humble beginnings you have built an empire. Along the way, there have probably been some influential characters that played a significant role in your success. Now that you have the cash, maybe it’s time to pay it forward as an angel investor.
Angel investors invest their own capital into high-risk startups during different stages of their development. Instead of the startup’s bankroll, the angel investor takes into account the brand idea, projected market response, and the overall company culture. Currently, the Halo Report studies show the top industries most appealing to angel investors are internet (37%), healthcare (24%), mobile & telecom (10.4%), and those defined as “other” (16%). Here are some helpful tips to help you get started as an angel investor.
Though regulations on public solicitation for investment have loosened over the past few years, you still need to become an “accredited” investor before investing in a startup. In the UK, your current assets, net worth, income, and other factors are taken into consideration for your accreditation approval.
If you aren’t interested in becoming accredited, you can look into crowdfunding. Crowdfunding sites such as Kickstarter and Indie Go-Go offer investors the chance to check out multiple startups and projects worthy of your cash. The platform of each startup has a multitude of information regarding the company including their business plan, investment goals, and current market statistics. The best part of angel crowdfunding is the versatility; you can invest in multiple companies or just one and you can contribute as much or as little as you want.
Join an Angel Investor Group
If you’re having trouble finding the right startup for you, try joining an angel investor group. These groups allow investors to work together to find worthy investments; in some cases these groups offer the opportunity to invest jointly in certain ventures. Joining these groups can also help you connect with entrepreneurs in need of a financial lift.
Assess the Risk/Reward Ratio
As an entrepreneur, you learned a long time ago the bigger the reward, the more hefty the risk. Accurately assessing risk goes hand in hand with prudent investing. Analyse current market trends, calculate you potential return on investment, and tap into your inner business savvy to determine which startup deserves your hard earned cash and attention.
Remember, in most cases, angel investing isn’t about cash returns. Usually, angel investors only see a return on their investment during the end-stage of the startup when it is sold or liquidated.
Back Up Your Investment
Angel investors want to see fledgling businesses succeed. This is why many become intimately involved with the startups they invest in. Backing up your money with hard- learned advice and a helping hand can go a long way. “Give a man a fish, he will eat for a day, teach a man to fish and he will eat for a lifetime.”
Angel investing is a labour of love. Be sure you know exactly what you are getting into before taking the plunge. If you’re looking to give back and possibly make a few bucks in the process, angel investing just may be the perfect choice.
Photo via Helsinki Open