For some, investment doesn’t come in the form of stocks, shares, or various types of currency. It comes in the form of startups. Angel investors enjoy putting their money into other people’s businesses, helping them to grow and succeed, and ideally bringing them a good return on their investment after a set amount of time.
Just as with any investment, there are no guarantees regarding your return when investing in a startup, but there is something about the tangible results that really appeals to many. If you are considering becoming an angel investor, here are some of the questions you should ask before parting with your cash.
How Involved Will You Need to Be?
Some angel investors like to invest from a distance; they give their money to the business in question and let those who are running it do the rest.
Others prefer to be more involved, offering advice or even making introductions, for example. Before you decide which company to invest in, you will need to know which kind of investor you are going to be – one that is intimately involved, or one that simply checks in from time to time.
Knowing this will help you determine exactly where to put your money. If you like the look of a startup, but they want a lot of your time when you would rather not give it, you should look elsewhere, and vice versa. Eventually, you will find the perfect pairing, and this is where you should invest.
What Is the Timeframe?
Most businesses, even with substantial investment for marketing and growth, take many months, if not years to reach a steady level of success.
Make sure you’re aware that this kind of investment is for the long term. Having said that, you should also ask about the timeframe – a good business owner will have made an accurate business plan, and this is what you need to see before investing.
The business plan will tell you the kinds of profit levels that the business is expected to make and, crucially, how long it will be until those figures come to fruition. This will tell you how long it will be until you make a return on your investment so that you can make a choice that works for you regarding investment.
Is There an Exit Strategy?
No matter what kind of business you’re investing in, there must be a clear and sensible exit strategy in place.
Consider whether the startup is offering something that there is a market for. This could be the latest trends in fashion or perhaps a new and exciting lifestyle app. Whatever it is, it must provide a new and exciting service.
It could be offering engineers with the latest in technology by using circuit boards from Altium’s Circuit Studio, or it could be tools that aid with efficiency and running of a business. This is vital when it comes to startups, especially if the market is an unstable one.
An investor will need to believe in the product. Unfortunately, an investor will need to know at which point they will be able to withdraw their money if the figures don’t work out as the business plan predicts they should.
A good investor will need to see the beginning, middle, and end of a business laid out in front of them before they invest any money at all. Although altruism is a nice offshoot of investing in startups, the main aim is to make money, and this needs to be considered from the start.