An angel investor is an individual who makes direct investments of personal funds into a venture. Typically, angel investors invest in early stage businesses, including startups. They can invest at any point, including before the business gets off the ground.
Because angel investors invest capital at a risky time in a business venture, they must be capable of taking a loss of the entire investment. Because of this, most angel investors are high-net-worth individuals and should be accredited investors, as defined under the Securities Act of 1933.
According to Rule 501 of the Security Exchange Commission (SEC) regulations, accredited investors need to have a net worth (individual or joint, if they are married) of at least $1 million or an income of at least $200,000 ($300,000 for married couples). There needs to be a reasonable expectation that the investor will reach the same (or higher) income level the next year.
Angel investment is a good small business financing option for a lot of entrepreneurs. They fill in the gap between hitting up friends and family for money to start your business and catching the attention of venture capitalist groups. Angel investors invest for a variety of reasons. Some invest strictly for the ROI. Others invest as a way to help a growing business get off the ground, providing mentorship along the way and assuming they’ll get their financial ROI later on down the road.
>> Read more: Venture capitalists vs angel investors
What is an angel group?
An angel group is what it sounds like, really. It’s a group of active angel investors who collaborate and cooperate in part of the investment process.
Angel groups are usually controlled by member angels who manage the entity or have control over the entity’s managers. If you’re getting into angel investing and want to connect with other investors, then consider joining an angel group. They’re frequently divided up by region, making it easier to connect in person. To get started, take a look at the Angel Capital Association.
Angel groups can make investing in businesses easier, especially for new investors. You can get connected to significantly more opportunities through an angel group’s network than you would on your own.
Angel groups also benefit entrepreneurs. If you’re looking for investors, then approaching an angel group gives you access to several investors, some of whom are probably experts in your niche field. You can also use the resources on Capital Raising Club to find investors who are interested in your niche and can help you grow your business.