10 Reasons Angel Investors Choose to Invest in Start-ups
Investors are often hesitant to invest in start-ups and SMEs. The main reason being the high risk of failure attached with it. According to various credible surveys and statistics, for over the last decade the start-ups haven’t been able to reach their five-year goal. This high level of uncertainty is dependent on multiple factors like their sector and the type of business. Hence, angel investors are crucial for start-ups as they offer early-stage money for the business’s sustenance.
10 Reasons Angel Investors Choose to Invest in Start-ups
There is a high preference for this sort of investment in the US for initiation of companies. Over the past several years, angel investment has become a significant financial backing for new ideas and start-ups. But a question still arises: what draws the angel investors towards investment in start-ups? Hence, we offer an insight into the highlighted reasons:
1) An excellent opportunity to invest
Angel investors are always looking for options to invest in start-ups as they come with numerous advantages. They seek start-ups that have a great reach to the audience and have the potential for excellent results. Angel investors, who have experience and are wise enough can figure out the growth capacity of a given start-up. They would only invest in a potentially viable and highly marketable idea.
2) An inherently managed team
Angel investors appreciate leadership qualities in businesses with a streamlined management. They are keen to offer capital for companies that comprise competent, observant, and reliable owners. The industry that has a complete blueprint of their project including a proper understanding of their target audience, flexibility, experience, cordial relations, etc., attracts angel buyers. They require assurance regarding sustainability of the business in the form of an efficient management team.
3) The reliable statistics and ROI
The high return on investment being a primary goal behind the investment, angel investors analyze the type of business and their target audience. They will invest in a start-up if they feel there are chances of high sales and conversion rate at minimal investments. Companies need to prove that their products or services are worth buying and people will believe in their products in large numbers. They do a thorough analysis of the start-up business plan and decide on the investment.
4) A strong business plan
A solid business plan creates a massive impression on investors. The plan should include features like financial management, marketing strategies, customer support, and various other aspects. Angel investors need proper planning and strategy for a broad reach, more conversions, and to stay abreast of the competitors. The companies that offer a realistic and achievable approach for better conversions are the ones that get investments quickly.
5) Fool-proof return on investment
Investors are very analytical about the return on investments. They prefer investing in a business that provides sufficient proof of high sell-ability of the products or services. The companies engage in thorough market research and data analysis for making the perfect plan for financial output. Angel investors are always in favor of investing in them.
6) A credible business already in action
The businesses that are already selling or getting the target audience’s attention are on the priority list of the angel investors. It creates a sense of trust and confidence of the investors in the company. The high customer attention enhances the chances of investments.
7) Making the right investment at the precise time
There is no fixed time for starting a company. You weigh your chances and market economic conditions for targeting a large consumer base, or you may dive right into the business opportunity. In any of the given cases, if the service or the products gain popularity and start making sales, the investors show interest.
8) Enhancing the portfolio with diversity
Avid investors mostly create a strong investment portfolio through stocks and shares, property, etc. Their potential profit or loss is according to the ups and downs of the market. Hence, investors prefer to create a variety in the portfolio by investing in a start-up. Investors can control the effect of investment on some level, which assures their will for safe investment. With start-up investments, they also have the chance to invest in numerous sectors separately. Just like a company investing in properties can also invest in a reliable start-up like InVideo.
9) Being an active contributor
Numerous angel investors have an interest in actively contributing time and money in a venture. They can choose a unique position in a company in the form of a mentor, a director of the board, a manager, etc. Their active involvement helps them to ensure a positive return on the investments they make.
10) Be a part of the social impact
In the ever-changing investment scenario, investors are now focusing on projects that positively impact the environment. Start-ups that are benefiting the world in simple ways are getting a strong investment back-up. It is a welcoming move across the world, and investors in all major countries are networking with social projects and companies for providing a visible change in the environment.
Conclusion: With thousands of start-ups and SMEs formed every year, only a few are lucky enough to avail angel investments. Investors do an in-depth analysis of the company they are interested in investing in. It is upon the company to present themselves as highly potential and to offer marketable products or services. The start-ups that possess a stringent business plan and efficient management strategies tend to attract investors. These investments play a major role in sustainability and growth of the company.
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
- Fino Payments Bank IPO Review – Is it good or bad for investment? - October 26, 2021
- Sovereign Gold Bonds – Series VII (2021-22) – Should you buy or avoid? - October 26, 2021
- Nykaa (FSN e-Commerce Ventures) IPO Review – Is it good or bad for investment? - October 23, 2021