Finding Funding and Angel Investors for Your Business
Provided by HG.org
Finding funds when initiating the processes of building and creating a new business is often difficult work and may lead many to lose hope of starting something they feel passionately about. However, there are many potential investors that are of help to those that prove to be the right caliber.
Some investors or financial help must be sought, and others are available to those with the right searches online and through certain sources. To find funding, and individual may seek the aid of a professional, someone that is investing in an industry or numerous other entities or institutions such as a bank for a loan.
Angel investors should be sought by those with the knowledge of and experience with wealthy benefactors. Someone that may be considered an angel investor could be a doctor, lawyer, partner in a business or similar persons. Many entrepreneurs that are invested in assisting those trying to get off the ground could be of assistance to a new company owner. Most of these persons have plenty of income and funds to place into a new business as well as experience and knowledge of how to ensure the organization is successful. If it is possible to have someone such as this on the side of the owner of a startup, he or she should be sought at all costs for investment, advice and guidance.
When someone knows another individual that has the resources to assist in building and funding a business, he or she may be considered an angel investor. This wealthy benefactor must be considered by certain agencies and be deemed someone that may assist. Investors usually expect a return on the investment through profits, sharing of profits, a stream of revenue or interest in the company that has been built with their help. However, they meet with certain Securities Exchange Commission's agents so that they may meet what is considered an accredited investor. This generally means that the individual must have no less than $1 million of net worth in income, investments or revenue as well as earning at least $200,000 each year.
These requirements may be adjusted based on the state, as certain income in one location of the country is not as much as other areas. However, with greater than just thousands of dollars to assist someone, they are typically added to the definition as detailed by the SECís demands. In order for the arrangement to work, the angel investor gives the money to the company owner, and he or she in turn provides equity of the business to the investor. This investment is then filed with the SEC. These types of investments usually are about $600,000 in value. However, due to the necessary capital to ensure the business runs smoothly, there are frequently more than the single investor.
Benefits of Angel Investors
Most that benefit from these types of investors are those with established companies outside the startup phase. This usually means that they have started working with the public and the markets, but they need additional capital to develop services or products to survive the business world. In typical circumstances, these organizations are the recipients of angel investments because they already have revenue coming into the company, but more money is needed to grow or progress. The investor could provide both the funds needed and become a mentor to the owner or manager. This individual wants the company to succeed and would like to see a return on the investment.
Disadvantages to Angel Investors
Due to the amount of money invested to further the business, it is possible for the owner to see at least ten percent and as much as half of the interests being displaced to the investor involved. In the worst possible circumstances, it is possible this investor may view the owner as what is wrong with the company and fire him from it. And endgame scenario is wanted by this financial helper, and he or she would like to see his or her money accrue through revenue. However, for some, it does not matter how this occurs. This means if the business is bought out, merged or acquired by another, some do not care as long as their money is returned with interest.
The Help of a Lawyer
Because it is possible to lose a business through an investor, it is important to seek the assistance of a lawyer to ensure there are specific contracts drafted to protect and provide mutually beneficial circumstances to both parties.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.