In the market, ups and downs are inevitable but not unpredictable. So, when a new product/service is launched by a small business or a startup, an Angel Investor is the one who supports it by investing in their team, ideas, vision and future plans. In the digital world, a surge of startups and new entrepreneurs has led to more and more Angel Investors ready to listen to the pitches of these revolutionary businesses and invest in them. Angel Investing also increases the market and improves the economy of the country. This blog brings you a detailed guide on what Angel Investing is and how you can become an Angel Investor.
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What is an Angel Investor?
An Angel Investor, also known as a seed investor is someone who provides capital for small early-stage start-ups or entrepreneurs, usually in exchange for ownership equity. Angel Investors were once assumed to be of only the wealthy capitalists. But with time, small businesses are gaining momentum over their inclusivity and open-mindedness thus helping people invest in their stocks. It is easier for an individual to invest in a start-up as the costs of investment have been lowered. Most commonly, when an Angel Investor funds a start-up, there is no debt, and no money has to be repaid because they generally take up ownership equity in the company itself.
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What does an Angel Investor do?
As explained above, Angel Investors possess a high net worth or strong financial background and a keen acumen of financial investments. In Angel Investment, there is no debt formed nor there is a need to repay. Instead, the investor gets equity shares in the company. The higher the capital invested, the higher the shares provided to the angel. The money funded by the Angel Investor is used to start the business and upgrade it further.
Let’s take a look at how these individuals invest in an up-and-coming start-up through the following deciding factors:
- Team: This includes how well a team is assigned, the experience of the team members, the teamwork, the creativity, problem solving skills and how successful the results are.
- Traction: A team with several clients and high steady growing profits and sales results in high traction. Investment should be done to expect a better increased yield. A team that is unable to keep the sales steady is dangerous to invest on.
- Production: Production of the product which has demand in the market is necessary. There is always a competition so better and upgraded items should be produced. The more the products are sold in the market, the higher the sales.
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How to Become an Angel Investor?
There is no certain academic qualification you need to become an Angel Investor but only an insightful knowledge and sharp understanding of how start-up investments work, finding the right start-ups to work with, keeping up with the business markets as well as learning about financial risk management, investment analysis and so on.
Angel Investors come from different backgrounds, be it business, engineering or finance, and are generally highly experienced individuals who know about the business market, equity investments, start-ups and entrepreneurial world and financial and risk management. So, here is a career map on how you can become an Angel Investor:
- Pursue Short-term Courses in Venture Capitalism and Angel Investing: There are a few institutes and schools which offer short-term courses and workshops on how angel investing works and how you can kick start your career in it. Get familiar with how angel investors decide the right startups to invest in as well as strategizing the best financial risk plans.
- Meet Other Investors: Practice makes a man perfect. You need to observe, understand and work on your quick decision making skills with the already experienced angel investors. Broaden your network by getting in touch with angel investors and venture capitalists and seek their guidance in how you can begin in this career.
- Research: Investing is a high risk, high reward situation. As you research, the chances of higher returns increases. Attend workshops, seminars, learn about trade from entrepreneurs and other investors.
- Angel Investing Group: Join an Angel Investing Group if you are inexperienced and are not keen on taking risks. The group will help you decide your various options, keeping in check of risks and threats. Chennai Angels is one such prestigious angel network in India.
- Strategies: Once you have researched and read about the potential risks, next step is to strategize how much you will invest.
- Do Not Quit: Angel Investing is a skill that needs to be perfected by never pausing. Invest in various start-ups, learn from the mistakes of others, join the seminars even if you are not keen on investing in them. It can be perfected with time, constant effort and experience.
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Angel Investing Courses
We have listed a few top angel investing courses from India and around the world-
- US Market Access Centre
USMAC teaches the whole overview of how to angel invest in a risk-averse mindset to a risk-embracing environment
Course Duration: 3 Days
- Mumbai Angels
A 3 session course with great experienced angel investors like Dr. Aniruddha Malpalani and Gita Nayyar guiding you in a step by step process.
- Association of Wealth Management of India (AIWMI)
A 16 days weekend course that teaches you everything about angel investment, venture capitalism, startup exits in a 12 days theory session, 3 guest lectures and 1 Practical Pitch day. This course is entirely online.
- UNSW Angel Investors Programs
A three-day course with Australia’s leading angel investing experts with their insights to guide you and understand the concept behind angel investments.
How to Start as an Angel Investor?
Here’s how you can kickstart your career as an Angel Investor
- Get involved in start-up seminars and events, at University Incubators.
- Explore start-ups and small business looking for investors.
- Assess the pros and cons of the product or idea.
- Keep a strong well-updated network.
There is no textbook that can teach you how to invest. You learn about investment by doing it and not studying it. An Angel Investor should not be biased and invest in all types of companies. Once you start investing and help a start-up, your name gets shared around and more investment opportunities come up. It is necessary to invest in a start-up that shows positive results but do not forget that most new companies often make a lot of mistakes. Soon they get adjusted and get back on track. So, patience is an important virtue for an investor.
Which Start-up to Invest in?
Now that we understand how an angel investor works, it is time to understand how to differentiate the best start-up for you in the market.
- Know the market: An Angel Investor should know and be updated about the demand of the market and what the consumer’s demand is. Invest in an industry about which you have knowledge. Increase your knowledge by reading market blogs, magazines, market forecasting.
- Find Start-ups: Search for Start-ups that you think are revolutionary or will increase the profits. The best way to find start-ups is socializing and meeting people, attending seminars, conferences, trade fairs. Listen to their ideas and if you like some start-up, share your contact.
- Look for a Solid Return On Investment (ROI): The risk is real in Angel Investment. So higher returns are preferred when they invest capital on the start-up. Start-ups that have revolutionary ideas that show high marketability and profitability should be your best choice. An angel investor should be interested to study the annual accounts of a business.
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Certainly, the field of Angel Investment is growing exponentially. We hope that this blog familiarized you with how you can pursue the challenging but rewarding career path of an Angel Investor! Looking for a course in Investment Banking? Let the experts at Leverage Edu help you find the right program and university as per your interests and aspirations! Sign up for a free session now!