Angel investors are people who fund new startups and founders and take shares in their companies. These inventors funded around $25 billion in more than 70,000 startups alone in 2017. According to a survey of 150 founders of Wilbur Labs, almost 70% of entrepreneurs will suffer potential business failure during the first 25 months of founding their firm, and roughly 66 per cent will experience this possible failure within the first 25 months of launching their company. A rapid increase in the number of angel investors participating online through equity crowdfunding or forming angel clubs or angel networks to pool their investment resources and offer guidance to their portfolio firms. The number of angel investors has risen dramatically in the previous 50 years.
What are Angel investors?
With the exception of venture capitalists, who manage the capital of others in a professionally run fund, angel investors consider investing their own money. The real entity that delivers the financing may be a trust, firm, limited liability company, investment fund, or another vehicle, even though it often reflects an individual’s investing judgement. Angel-funded startups are more likely to flourish than businesses that focus on other sources of initial financing.
These investors bridge the gap in startup fundraising between “friends and family” and more substantial venture financial investment. Although it is hard to acquire well over a few hundred thousand dollars from family and friends, most conventional venture capital funds cannot make or evaluate small investments of less than US$1–2 million. Angel investors invest in more than 60 times as many businesses as venture capital firms (US$20.1 billion vs. $23.26 billion in 2010, into 61,900 vs. 1,012 enterprises), and their combined worth virtually equals the total wealth of all US venture capital funds.
They do not have a “minimum” investment; they can invest anywhere from a few thousand dollars to a few million dollars. In 2010, healthcare/medical accounted for 30% of total angel investments (vs. 17% in 2009), followed by software (16 per cent vs. 19 per cent in 2007), biotech (15 per cent vs. 8% in 2009), industrial/energy (8 per cent vs. 17% in 2009), retail (5 per cent vs. 8% in 2009), and IT services (5 per cent vs. 8% in 2009). (5 per cent). Angel investment, while more accessible than venture capital, is nonetheless incredibly tough to come by. Nevertheless, new models are emerging that aim to make this process much more manageable.
How Does Angel Investing Work?
These investors tend to invest early in a company’s life cycle during the “seed” or “angel” fundraising period. It could depict that the angel supports when the firm is still only an idea, or it could imply that the angel invests when it is already up and operating.
After the primary round of investment, which generally comes from the founders themselves, friends and relatives of the founders, or bank finance, angel investors may appear. Initial startup capital is usually tiny—normal it’s for creators to launch their product or service with $10,000 or less in seed money.
Angel investors enter the picture after the initial finance has been secured, but usually before a company requires a more significant investment from a venture capital firm. Their contribution is needed to help a firm grow at a vital (and usually early) stage of development when original finance is running out, and venture capitalists are interested in partnering with a potential company.
This is how the actual investing procedure works:
- Word of mouth, business and trade seminars or conferences, recommendations from professional investment organisations, internet business forums, and local events such as the chamber of commerce meetings are ways that angel investors engage with new, developing enterprises.
- If there is a shared interest, the angel investor will interview the founders, study business investment documents, and assess the firm’s industry targets as part of their due diligence.
- Once an angel investor has reached an agreement verbally, a contract or term sheet is set up, detailing the equity or payouts percentages, investment terms, protections and investor rights, governance and control criteria, and the angel investor’s final exit strategy.
- The arrangement is officially closed, and the capital funds are available for the company’s use once the contract is finalised and a formal agreement is established and signed.
Although contribution quantities differ, levels of funding can range from $5,000 to $150,000. Some angel investors form a group and can offer up to $1 million in capital for selected businesses.
Angel investors typically do not own more than a 25% share of a company. Angel investors that have been around for a while know that the firm founders need to have the largest share in their businesses since they will have the most incentive to see them succeed.
The Top 3 Angel Investors in India in 2022
Well, like other developed countries, India has seen a plethora of angel investors who have funded new startups and helped them grow. Below are top 5 angel investors in India:
- Sanjay Mehta
Sanjay Mehta, a venture capitalist and technology investor, has increased to notoriety in the world of investing due to several notable successes he has witnessed throughout his decade-long career. The most famous was the 280 times return on Ritesh’s OYO after early funding in the hotel’s aggregator, which was preparing for an IPO.
- Anand Chandrasekaran
Anand Chandrasekaran is an entrepreneur and angel investor. He works for Five9 as an executive vice president of product management. Anand brings a passion for products, a thorough understanding of the mobile ecosystem, and a track record of entrepreneurship to Storm. He is currently the director of mobile product management at Yahoo search !’s product division.
- Sandeep Tandon
Sandeep Tandon is a tech entrepreneur, investor, and mentor. FreeCharge, India’s first mobile payment platform, was co-founded by him. He’s also the Managing Director of Tandon Group, a technological catalyst in India and North America that owns several companies and invests in startups.
He is a frequent Angel Investor and mentors several technology companies. He has over 20 years of experience in the IT area. He has a net worth of around Rs.11.5 crore as of September 30, 2020.
Thus, we believe the questions who are angel investors have been answered clearly. As they have no obligations because they haven’t filed for a new credit line and most angel investing entails equity arrangements, business owners aren’t obligated to repay the angel funder if the firm fails. Here comes InvestorBase.io, which provides a platform to new founders and helps them guide them in the right direction of raising funds. Here, they can search for desired investors, contact them and get the insights required for them to pitch. Thus, there’s no need to fear that any idea will not work. Just come up with good ideas, and InvestorBase.io will help provide a platform for pitching to the relevant investors.