Are angel networks a great investment alternative for startups?

Business, Finance - 09/03/2023

We’ve talked about the difficulty of raising funds for your business. Whether that’s applying for grants, loans or other investment opportunities, getting the capital you need without a catch is tough.

But what if there were investment groups that offered more than just their money?

These networks are called ‘angel investors’. They might be precisely what a new business owner is looking for.

What are angel investors?

Angel investors are a unique source of funding, offering startups an alternative route from the more traditional venture capital firms. 

Like many investors, an ‘angel’ will invest an agreed amount of funds into your business in exchange for a minor stake. This will usually be around 10% – 25%. Never enough to threaten a controlling stake. 

Where angels differ is the way they support businesses long after they’ve invested, using their extensive business experience to mentor startup owners. 

This could be:

• Using their expertise to make holistic improvements to areas of your business. 
• Offering a wide network of contacts collected over a successful business career.

It’s in their best interest to guide you through the early stages of your business. No matter how altruistic an angel investor might appear, an investment in an unproven business will always be a risk. 

The positives

For anyone looking to improve their business, there’s always going to be some risk, especially when it involves accepting money from an external source. 

This is what makes angel networks such a nice change of pace from the usual investment firms. 

They see the potential of your business and invest early. This affords them time to guide you through those important decisions that often plague new business owners. 

What are the risks?

That being said, having an angel invest in your business doesn’t mean guaranteed success. 

Sure they might have strategies that showed favorable results with other investments, but those strategies might not be suitable for yours. 

And when you’re a startup, it may be difficult to disagree with them. Afterall you it’s likely that their expertise was exactly the reason you accepted a partnership in the first place.   

Depending on the amount they invest, an angel might expect instant returns equaling ten times the original investment, which can put a lot of pressure on new business owners to generate.  

We suggest the same attitude as anyone looking to find investment opportunities; always do your research and never accept the first offer that comes your way. Meet with a number of investors before making your decision.

As mentioned before, there’s always the risk of your business never seeing growth, which may affect your relationship with your investor. 

If you’re unsure how to make the best out of your business, consult with your bookkeeper and see if investment is really what you’re looking for. 

Remember, a good bookkeeper can do more for a business by simply managing their accounts and creating solid, easy to follow financial plans. To see about outsourcing your cashiering services why not get in touch with us today?