Angel investing in startup businesses today is on the rise, and mega companies such as Uber and Facebook have contributed to the increasing trend. This means more and more are investing in early stage or startup companies in exchange for an equity ownership interest. But what does angel investing really mean, and what’s in it for these investors?
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Typical angel investments range from $25,000 to $100,000 per company, according to a Forbes report. But this can go higher depending on the enterprise and its specific industry. Angel investors typically look for a clearly articulated elevator pitch for the business, an executive summary, a prototype or working model of the product or services, as well as early adopters or customers.
Angel investors would also commonly inquire about the amount of capital an entrepreneur is raising, the monthly burn rate, the detailed financial projections for the next year or two, the unit economics, and the likely gross margins, to name a few. In addition, the investor would want a sense of how the company seeks to market itself, including its PR strategy, customer acquisition costs, and form of advertising to be done.
What does an angel investor really care about then? The answer lies in the founders’ integrity, commitment, and passion; the marketing opportunity being tackled; an appropriate valuation with reasonable terms; and the viability of raising extra rounds of financing once the deal progresses.
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It is important to note, though, that this isn’t “remote control” investing, and an angel investor simply shouldn’t go with the flow or accept things as they appear on the surface. A good angel investor does his or her own homework, determining the changes of success for the company and its team as well as committing only to ventures that pass these criteria.
A business graduate from the Iowa State University, Steve Sorensen has always been fascinated by the huge and often meteoric growth in net worth of some of the world’s most successfully companies. Learn more about business and investing on this page.
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