Angel Investor: Definition, Types, Strengths and Weaknesses, and How to Get Them

The term angel investor is often heard among startup supporters. Angel investors are high net worth individuals who provide finance for small businesses such as startups.

When you hear the word funding, you probably think of venture capital investments. However, there is a sizeable difference between angel investors and venture capitalists.

Their existence is also very beneficial for the development of startups so that later they can develop their products or services. So what do these investors mean? Don't worry, here we will explain it for you.

What are Angel Investors?

Angel investors are wealthy individuals who provide financial support for small businesses such as startups. He usually needs compensation to get investment in the startup.

Angel investors are often close people, such as family members or even entrepreneurs. Angel investors are also often referred to as business angels, angel investors or even noble investors.

Unlike venture capital, these investors only provide startups with a one-time investment fund to help them through difficult times. In general, angel investors are more focused on helping startups grow than prioritizing profit potential. Although the risk sounds very high, the benefits they receive are certainly very tempting.

Types of Angel Investors

There are several types of angel investors who often fund new businesses, including:

Family and Friends

Relatives and close friends can become investors who support your company financially. Of course, the size of the business you run doesn't have to be big, for example a bakery.

The rich

Rich people are people who have a lot of wealth and are successful as entrepreneurs. For example, a doctor funds a medical device company.

A Group or Organization

The next type of angel investor is a group or organization that has the potential to provide funding. For example, animal welfare volunteer groups donate funds to build zoos.

Crowdfunding

Crowdfunding is a popular form of financing that companies often use for their businesses. An example of crowdfunding is that anyone can invest regardless of the amount given.

Advantages and Disadvantages of Angel Investors

There are advantages and disadvantages if you decide to let these investors into your business. Reporting from The Balance SMB that angel investors have an advantage because your money will come back if a loss occurs.

If you borrow money from a bank to fund your startup, you will eventually have to pay it back, even if the startup fails.

This is different from angel investors. You have done an excellent job of researching and analyzing companies with great long-term potential. Hence their decision to become a lender so they have to bear the risk if it comes true. In the event of a loss, the invested capital does not need to be returned.

But the loss that you will experience is that investors will definitely take over some of your business. Dividing into two after loneliness includes the problem of benefits received.

How To Get Angel Investors

Based on the explanation above, angel investors are companies that help startups and other developing companies to get funding. The existence of angel investors is of course very helpful for companies that are struggling and facing difficulties, especially in terms of financing. Then what can be done to get Angel Investors?

Prepare a business plan in advance

First, make sure your business plan is ready. A business plan will help you get an estimate of how much funding is needed, what strategies and priorities need to be implemented, as well as being a communication tool for investors about the difficulties you are facing.

Create a business plan in presentation format

For a better understanding, it makes sense to summarize the business plan, which initially consists of sheets of documents, in the form of a presentation. You can create visualizations like:

Tables, pictures and more. This method makes presentations to investors much easier.

Find potential angel investors

Look for potential angel investors who are interested in funding specific companies, especially those in the industry you are currently in. For example, some angel investors focus on specific industries, local markets, or affiliated companies such as university alumni.

Do some research on angel investors

The most important thing is not to message angel investors you don't know. The solution that can be done is to do research on them, such as:

What kinds of meetings do you often have? Meet in person, by phone or email. This method can help you determine the first steps to approach an angel investor.

Make sure you have a relationship with a lawyer

In this case, an attorney will help you arrange cooperation with investors, including written requirements and important documentation. This happened because agreeing to an investment is a serious matter.

So that's information about angel investors from the meaning, types, and how to get angel investors. Hopefully now you understand more about what an angel investor is.