Home Finance ANGEL INVESTMENT – THE PROS AND CONS
Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

ANGEL INVESTMENT – THE PROS AND CONS

by jcp gbaf

Dash Tabor is co-founder and CEO of TUBR, a tech start-up which has developed machine learning technology that needs only a fraction of that data usually required to make real-time predictions across rapidly changing environments. She studied for a Masters at Kingston University in City Planning and Sustainable development and now runs TUBR.

Dash says: “Utilising data is at the heart of what they do. We realised early on the data companies needed to solve the business issues can be complex and incomplete, so we started tackling the problem of getting companies tools to work with smaller datasets.  I want to grow the business fast and smart. Long term we see ourselves as a deep tech company that builds insightful solutions for the world’s “smaller” data problems.”

Like all new start-ups, securing funding from Angel Investors ranks high on TUBR’s list of priorities.

Dash explains: “Angel Investors are often more willing to invest at a very early stage and bring specific supportive skills to a founders group.Angels typically come to support the Founders at finding product market fit or growing additional traction in order to go for more institutional funding like VC or Family Offices. Angels are investing money for the most part because they’ve tapped out other tax-efficient ways to invest their money and they are looking for tax incentives. They typically also really want to be able to invest in a place where they can be of support. The best angels have a passion for their founders and the companies.”

On how to connect with investors, Dash says: “Angels can be found in a lot of different ways. Angel Syndicates is the best way to pitch a lot of angels at once, but that typically costs the company a fee or percentage. LinkedIn or Angel Lists or connecting via your personal network are great ideas too. I find warm introductions are always best but angels are more likely to take a look at a company through a cold contact. It depends on the investment thesis of the angel.”

On why Angel investors are important in providing funds for startups, Dash says: “Angels are often the first check in, and they are angels because they assume the most risk. It’s the reality that without Angel Investment many companies would never get off the ground or have any capital to test some theories.”

Here, Dash gives her insight on the pros and cons of Angel Investors:

Pros

*Because angel funding is less formal and more flexible than other types of startup funding, angel investors make excellent backers for startup businesses. Before investing, however, angel investors will want to see the business is growing and projects the opportunity for growth.

*While you’ll need to come up with a pitch, financial projections, and a business plan, you won’t need a lot of paperwork to close an angel investment compared to a business loan. Usually, a convertible note—which is a short-term debt that has an interest or discount rate, a valuation cap, and maturity date—is used to finalize the investment.

*Because angel funding isn’t a loan, it doesn’t require monthly payments This can help your short-term cash flow since you won’t be adding a monthly loan payment to it. Angel investors are repaid eventually at either an acquisition or when new funding is raised.

*Not only are you receiving funding from an angel investor, but you’re also gaining their knowledge. This can be crucial for a startup, as you can lean on the investor’s knowledge when making business decisions, leading to greater success. The support we’ve received from our angels is second to none. They are supportive. They are always willing to jump in and help and bring amazing knowledge in areas where we don’t have it.

*Angel investors can network you with potential clients, helping grow your business. Investors can also network you with other startups they have supported, which can help form strategic partnerships.

*Because angel investors get repaid when your company goes through future funding rounds, there’s an incentive for investors to help get your company to that point as quickly as possible.

Downsides

*While there are online resources to find angel investors, like AngelList and FundersClub, it isn’t easy to get investors. In many cases, your best chance to get angel investing is to have an existing business connection with an investor.

*Because angel investing is less formal than other types of startup funding, negotiating terms for the potential deal can be complicated. Both sides want to ensure they get a good deal, which can often lead to a verbal back-and-forth but never a finalized agreement

*Angel investors typically receive convertible debt at a premium of 20%. At the next valuation, investors can convert debt into equity. The more times you raise funds, the more equity you give away in your company.

*Angel investors want a return on their investment as soon as possible, as investors expect startups to grow rapidly within three to five years. This means those investors will be pressuring you to continue growing your company, even if that’s against your company’s long-term plans.

*As you continue to raise funds through angel investing, you continue to give up equity in your company—and this means investors increase control of your company. While having more experts to consult can lead to business success and decision-making, it could also lead to a company going in a different direction than you intended.

You may also like