Why Angel Investments Go Beyond Just Money
It is almost impossible to keep up with the advances in innovation and technology these days. Every day we see the birth and development of startups in newer, progressive fields. Although entrepreneurs are adopting lean methodologies to grow, they are likely to require funding at some stage.
Angel investments are typically made in the early stages of a business. Angel investors are high net worth individuals who have some risk appetite. While many angels invest in their individual capacities, there is a growing trend of angel investors coming together in groups to invest in startups.
Although the primary motive of raising angel investment is to fund the next phase of growth, these investments go beyond just money. Angel investors bring a lot more to the table, as discussed below.
Expertise and Mentorship
Angel investors are usually individuals who have extensive experience in running businesses at different levels of management. Some may be entrepreneurs themselves, while others might be leading teams within organisations. Either way, angel investors bring lots of knowledge and domain expertise with them, which entrepreneurs can leverage
Markets today are so dynamic that business decisions need to be made quickly. This is where angel investors can be of great help. Having seen and built businesses from the ground up, they know how to strategise and predict market conditions.
Some angel investors become board members, so they have all the more interest in participating in the decision-making process. Seasoned angel investors also learn from their past investments, successes and failures. Such diverse knowledge and experience are invaluable for any startup.
Industry Connections and Network
Another big advantage of having angel investors is the rich network that they have access to. It is easier to approach businesses and individuals through qualified introductions, and angels are happy to help entrepreneurs get in touch with the right people.
If industry connections are leveraged in the right way, startups can get the perfect platform to scale correctly and be on track for the elusive hockey-stick growth. If entrepreneurs get this kind of momentum in their early days, they can take on the big players and develop sustainable competitive advantages.
Investors can sometimes even connect entrepreneurs with other entrepreneurs like them who can give them more specific inputs, having been in the same position before. Not only that, but they can also give access to the right investment bankers, chartered accountants, lawyers and other professionals.
Credibility and Associations
Being well-respected and well-known industry leaders, angel investors add a lot of credibility to a startup if they choose to invest in them. Since startup investments are always tricky, and not everyone has the risk appetite to take a chance, having a big name associated with the startup can be a game-changer.
Such credibility is also helpful when the startup has to raise future rounds of investment from bigger organisations, venture capitalists or even private equity firms. There is a distinct advantage when it is known that a particular angel investor has backed the startup in its early stages.
Even if certain angels choose not to invest, their word and recommendation is also of great value and can help entrepreneurs close worthwhile deals. They can reach out to others in their network and put in a good word for the entrepreneurs. This is also why entrepreneurs are always told to be ready with their elevator pitches and key numbers because even a small conversation can lead to something big.
Bottomline
While an angel investment is not a no-strings-attached investment per se, it is an excellent option for entrepreneurs because angels understand the risk they are undertaking and do so willingly. They know the learning curve involved with every team and startup and act accordingly.
Given the great benefits of having an angel investor on board, it is always beneficial for a startup to do its research before it starts seeking funding to target having the right investors for the business. Of course, the profile of an investor is necessary to look at, but their thought-process and long-term visions should also align with that of the founders.
