Angel Investing 101
How To’s of Angel Investing
What is Angel Investing?
Angel investing is a form of private equity where high worth individuals provide seed funds or their own capital to early-stage startups in exchange for ownership equity. These investors are known as “Angels” who not only provide funding but also offer their mentorship, expertise and connections to the startup founder. Angel investments are considered high-risk, high reward, as startups have a higher chance of failure but successful ones can yield significant returns.
How are Angel investments different from Stock Market investments?
The biggest difference is liquidity. Angel investors commit their money for years where the investment cannot be cashed out at any time. Stock investors can buy and sell shares at any time on the open market. Angel investments can take between 7-9 years for a successful exit.
How much capital do I need to have available to invest in a Company?
Seedfunders individual angel investments start at $5000 per deal. Our aggregate deal size minimum is $50,000 and typical investment size is $100,000.
As a percentage of a personal investment portfolio, Angel and Venture investments typically range from 5-12% of the total value. Ultimately, it is a personal decision as it depends on the angel’s financial situation and risk tolerance.
How do I become an Angel?
First, you must be an accredited investor. Then, understand the risks associated with angel investing to make sure your risk profile fits. Next, educate yourself. – visit the ACA, research books videos, blogs online – attend a pitch event. Ask experienced angels for advice. Still interested? Join an angel group like Seedfunders or a platform like Seedfunders Syndicate.
How to qualify as an accredited investor.
The SEC defines an accredited investor as one who has made $200,000 per year for the past 2 years, or $300,000 including spouse, OR has a net worth of more than $1 million, not counting the value of their permanent residence.
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