Detail description

Generally, angel investor provides capital support to new or small business venture for startup or expansion. Basically they are either a single individual investor or group of person who create a fund or have some vacant unused cash and observing for a higher rate of return than the customary investments. The investment by angel investors during initial stage is just to carry the operations through its early stages. Angel investors are very significant for minor and average sized enterprises because they provide management support from their experience along with money. They contribute their services in business just to make the startup successful by infusing knowledge and expertise. They are literally very rich and well off persons with great business knowledge. Another advantage of having an angel investor is they lend unbelievable reliability to the company. The name of an influential and experienced man works as a catalyst for the progression of a business.

Importance of angel capital investment

  Angel investor plays an important role for the economic development by providing the risky capital to startup that will leads to implementation of projects with some new ideas and upgraded technology.

  The main aim of venture capitalist is to put more focus on passion and commitment of the founders who identify the large market opportunities.

  Due to initial phase of funding, startup becomes more reliant on angel investors as they offer loans on comparatively easier rate of interest as compared to venture capital investors.

  Angel investments are impeccable for businesspersons who are financially stressed during the early phase of their business. The actual internal rate of return that must be expected is 20% to 30% from a successful portfolio.

The affiliated angel category includes:

   Business associates: Business associates are the people who are currently associated with the business and with whom business makes interaction during the trade.

   Contractors: The person with whom business contracts to run the company just like vendors, suppliers. They are very useful source for as affiliated angel investor as they show vital interest in company's success. Investment of supplier can be in form of better payment terms other than cash. Angel investor can make investment in kind also.

   Customers: It is the customer only who uses the products on daily basis. If the quality of product is good and it gives the impression to the customer that the start-up could be successful if it maintains the goodness. They can also come forward to support them or startup can also make the list of all the customers with whom a business has good sort of relationship.

   Employees: Key employees of startup who have unused funds and wants to make investment and startup knows about it then founder can approach them for investment or can say as a business loan. There is no greater motivation to an employee than to share ownership in the organization for which he works.

   Competitors: These include owners of comparable companies with whom a startup don't directly compete. If a competitor is doing business in another sector of the country and doesn't make any infringement within the territory, he may be a compassionate investor for the startup.