Angel Investors And How They Work
Updated: Jun 29
As a start-up owner, finding funding for your company is super important. The concept of angel investors and angel investing is always floating around in the back of your mind. Perhaps you may not be as aware of how to go about approaching a Mumbai angel investor or looking for those angel investors that can fit into your company. As such, this blog is going to focus only on angel investors and how they work.
Now, why do angels investors take that risk in investing in early-stage start-ups? The simple answer is that it’s highly profitable. Angel investor near me now plays a very large role in our country’s economy. Angel investors have become the primary source of funding for most start-ups now.
Who exactly are angel investors?
Angel investors India are those individuals that have high net worth and they use this capital that they have to invest in early-stage start-ups. Angel investors are also known as Accredited Investors. With this being said, not all angel investors are accredited, investors. Accredited investors are those individuals whose assets are worth 1 million or more. Now angel investors are free to invest in whatever company they choose. There aren’t any rules as such that they need to follow. If they want they can even invest in start-ups members of their families start. Most times, early-stage start-ups will get funded by family or friends. Approaching angel investors will bring about a certain professional element that might be missed when working with family.
The motivation behind angel investors investing in a start-up may differ depending on the investor. Some angel investors do it purely for profit. Others are looking to participate and give their insights and expertise into the business because they see the massive potential and believe in the start-up. Angel investors are also known to invest in those companies and industries that they are passionate about. It can relate to care, sustainability, education, commerce, etc.
It’s important to note that angel investors invest their own money into these start-ups. There is no guaranteed return for them, so they are very careful with what they invest in. As such angel investors will look not only for a good start-up but a good team behind it as well. A good team will be able to help achieve the potential that the angel investor knows they are capable of. If the start-up is good and the market conditions are in their favour, angel investors can stand to make more than 10 times their investment.
How do angel investors look for start-ups?
If you’re an angel investor who has just started building up your portfolio then it will take some time to be able to invest in the start-ups you really want to. Even as an angel investor you need to build up your reputation so that start-ups can trust and approach you. But once you have established yourself as an angel investor start-ups will come to you. This happens because of referrals. Other ways that angel investors acquire start-ups is through backing by other entrepreneurs, angel investors, your network and other professionals such as accountants, lawyers etc.
About Devansh Lakhani
Director of Lakhani Financial Services and a Chartered Accountant helps in start-ups funding India from his network of investors. He guides and advises start-ups to scale up by providing efficient sales, marketing, team building, and business management strategies. Being a business plan consultant he has executed fundraising by block deals on the stock exchange and conducted IPOs and right issues on the SME platform to the tune of over Rs. 50 Crore. He is currently working with start-ups from various sectors to help them channelize their business models and investments.