Angel Investing is a great way to build wealth. But you have to know what you’re doing. Here are some things to consider before taking the plunge into Angel Investing. There’s a certain way of thinking that goes with becoming an Angel Investor and it can be difficult for someone who doesn’t know what they’re getting into. So for those of you who are interested in going down this route, here are ten things that every entrepreneur should know about angel investing.
Why do you want to be an Angel Investor?
The first thing you should ask yourself is why you want to be an Angel Investor. There are a few reasons, the most common being that you have some extra cash and want to invest it with the hope of making more money in the future. But if that’s not your case, then think about why you want to be an Angel Investor. If there’s something missing in your life or business, then this may be an opportunity for you to change and improve on that area.
Another reason someone might want to become an Angel Investors is because they already know other Entrepreneurs and have a lot of contacts within their network and may be looking for opportunities for investment.
There are many reasons someone might want to become an Angel Investor; figuring out which one applies best for you will help make the process easier and better for everyone involved.
How much money can you afford to lose?
Before you take the plunge into Angel Investing, make sure you are financially ready. You need to ask yourself how much money you can afford to lose if things don’t go your way. You shouldn’t invest in something that will cost you more than you can afford to lose. So before signing up for a deal, make sure you know how much money is at stake and is it worth the risk?
What is the company’s growth potential?
The most important thing to think about before investing in a startup is to consider the company’s growth potential. Whenever you invest your money in something, you’re making an investment for the future. So if you don’t see a high growth potential for the business, then it might not be worth investing your money into it.
What are the company’s needs or goals?
One of the most important things to know about an Angel investment is what the company’s needs are. This is because there are a variety of investments out there, and some are better suited for certain companies than others. For example, if a company wants to expand internationally, they might benefit from an international investor. But if they want to launch a new product domestically, they might need to find investors that have experience in their given industry.
There’s no one-size-fits-all when it comes to picking an entrepreneur’s angel investor. So be sure that every company knows what their needs or goals are before pursuing investment opportunities.
How long are you willing to invest in this business?
Angel Investing is a long term investment. You won’t see the return on your investment for many years. If you want to become an investor, you have to be willing to invest your time, money, and other resources for that length of time. But if you expect to see a return within a year or two, then this may not be the best option for you.
How much time do you intend on dedicating to this business?
If you are a start-up entrepreneur, then you probably don’t have the time to dedicate to being an Angel Investor. If you’re an investor in a company, that means that you need to know what’s going on with the company and its business. You also need to understand how much time it will take up, especially if you intend on being in this for the long haul.
A lot of people want to be involved in angel investing but they aren’t sure how much time it will take up in their schedule. Entrepreneurs should consider allocating at least 5 hours per week to angel investing if they want it to work out well for them.
What is your investment philosophy and how will it help your business as an Angel Investor?
Your investment philosophy is the backbone of your angel investing efforts. This is essentially how you make your decisions and how you’ll approach making money in the future.
What are your investing goals? Are they to look for a quick return on investment (ROI)? Do you want to create more wealth? Do you value long-term growth or short-term profit?
Investing has many different philosophies about what’s important. It’s up to you to decide which one will work best for your needs.
The “quick flip” approach and how it differs from a “sustainable” approach
Angel Investing is always a gamble. The goal of an Angel Investor is to make a profit from the investment either through dividends or by selling the company for more than what they paid for it. This is called a “quick flip.”
The opposite approach, which may be more sustainable in the long-term, is buying shares and keeping them for as long as possible with the hope that the share price will increase.
The “hands-in-multiple-pies” approach
One of the most important things to know about angel investing is that, in order to make a profit, it requires you to put your hands in multiple pies. The more diversified your investments are, the better chance you have at making a profit. It’s not enough just to find an idea or company that could yield favorable returns; you also need to be able to adapt and move on if your initial investment doesn’t work out.
Investors can invest in many different forms of equity. They can buy stocks, bonds, co-invest with other angels, take an interest in a business (a “convertible note”), or even receive warrants for future shares. All of these types of investments come with different levels of risk and it’s important to understand the differences so you can decide which route is right for you.
Great post