There are professionals within the financial services industry, such as accountants and attorneys, whose primary function is to protect client wealth and assist them in planning for a stable future. They do this through assisting with taxation matters and other legal obligations, defending against any claims of non-compliance, and providing other prudent advice on how monies should be managed. There are others whose intention is expansion. They are the investment advisory firms, whose chief objective is to help clients to grow their wealth, and in the case of angel investing, to realize their dreams. Let’s consider how angel investment functions, and the why and how of attracting the right private backer for your grand business designs.
Angel investors are often high net-worth individuals, such as Steve MacDonald, As founder of Macdonald Ventures, Steve achieved multi-million-dollar success with his own ventures before turning his attention to helping fund the future of others, predominately in the fintech sector. Macdonald Ventures is one example in an expanding field of angel investors, some of whom have an interest or expertise in a specific area, others who are motivated by return, and many who are spurred by creation. Crowd-funding and angel syndicate models of investment are also increasing in popularity. All represent innovative forces that disrupt traditional channels whereby financing was controlled by larger institutions. These newer models of private investing remove the influence of banks and other governing bodies, and revel in the power of people to co-operatively organize, share, and inspire.
A 2020 study into angel investment activity for that year concluded that a staggering $25.3 billion dollars had been funnelled into 64.480 entrepreneurial ventures by 64,480 investors, continuing a year-on-year growth trend in the area. The majority of funding by angel investors occurs at the seeding stage of a business venture, as opposed to a venture capitalist who may get involved when a business is already up and running. As they are using their own money, angel investors may be offering smaller sums, and usually with an expectation of an early and profitable exit. It’s common for an angel investor to cash out of a start-up once the business is acquired or goes public. The risk to the start-up is clear, as during these initial stages their angel investor effectively owns a stake in its operation.
If you’re drafting plans to launch a start-up and want to secure angel investment, there are formal and informal networking avenues to explore. Angel List is an online platform designed to connect businesses with funding opportunities, while the Angel Investment Network enables business owners to promote themselves to a pool of over 279,000 potential financiers. Other avenues of exploration for angel investors include sites such as LinkedIn and local business groups and schools. With a little angelic assistance, your bright idea could well be the next big thing.