Angel investments are becoming a major component to the success of the modern business. They are responsible for creating a number of new jobs in every business sector and occur at the start-up or growth stages of companies. In 2013, angel funds helped to created nearly 300,000 jobs. Four out of every 10 tech sector executives state that their primary source of funding comes from angel investments.
Successful angel investors have learned some specific things through their experiences in this field over the years. These lessons can help first-time angel investors find the right place to put their money to see it grow and create jobs too. Here are the 5 things that you’ll want to keep in mind.
1. It Isn’t Always About Business Plans, Valuations, and Figures
As an angel investor, sometimes the qualitative issues need more weight than anything else. Knowing how the people work behind the scenes of a company is incredibly important. Sometimes a passionate, driven, but uneducated partner is a lot better to have than someone who has the knowledge to succeed, but not the passion.
2. Get a Complete Assessment of the Business Before Diving in
Before making any investment, it is important to determine if the concepts that a business has are authentic and needed. Questions about an overall financial status are important, but so is determining what an owner’s problem-solving capabilities happen to be. If you don’t get the whole picture first, then you’re putting your funds at risk and that’s never a good thing.
3. Look for Entrepreneurial Spirits That Have Honesty and Integrity
The problem with the modern world of start-ups is that there are a lot of people out to make a quick buck. Even with a rock-solid legal agreement, nothing is going to stop an angel investor from taking a loss when the company decides to disappear and the owners fly off to some tropical island with your money and no chance of an extradition agreement.
4. Don’t Go All-In On Anything
One of the easiest ways to avoid taking a big loss, even when there is a lot of risk involved, is to limit the amount of your total overall investment to a specified percentage of your net worth. Most angel investments should at most be 0.5% of one’s total obligation. It’s perfectly find to limit an investment to 0.01% if you are unsure of how an investment is going to perform.
5. You’ve Got to be Patient
Angel investments are expected to generate returns, but they generally aren’t going to happen immediately. It can take up to 10 years to start seeing results from an investment, so be patient. The next decade of work might seem like there won’t be much coming in, but the second decade of work might see your net worth explode like never before.
Angel investors are using crowdfunding platforms like never before. Small businesses need the capital you can provide. With smart investing, you can create a win/win situation.
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