by Joseph Maas
You may be looking for an angel investor to provide the extra cash your business needs to move to the next level of success. An angel investor can also provide other resources besides cash to accelerate your business. There are, however, a variety of different types of angel investors…and if you have a choice, you should consider which angel is right for you.
Angels come with their own particular pros and cons, and since you’ll be accepting their investment and business relationship, it’s wise to know what to expect with the different types profiled below. As you analyze these choices, a predominant thought should occupy your internal discussion: “Why would anyone choose to risk their precious money in my startup?” The answer may lie in the angel investor’s category, as you’ll see below.
- The Super Angel
This angel is widely considered a prize. The super angel often makes many investments because he or she realizes that making money is a numbers game. The super angel is willing to invest in 10 startups knowing that nine will fail and one will succeed…but that one success will pay for all the losses of the other nine and convey a hefty profit as well. The benefits of working with a super angel are the strong potential for additional funding and the super angel’s connection to a large group of CEOs who can provide important connections and project support. The detriment of this relationship is the super angel probably won’t have as much time for you as you might want or need because this investor is constantly busy with many other businesses.
- The Industry Angel
This angel is an expert in the same field as your business and is interested in investing with your company because he or she understands how the industry works. This angel perceives the need for your company’s products or services. You’ll find this investor is very capable of seeing your vision, which makes getting funded a little easier since both of you have similar values and passions. The advantage of this angel’s investment is the potential quality of their expertise and advice, and also the connections they established during their years in the industry. The disadvantage of an industry angel helping you could be their inappropriate meddling.
- The Professional Friend Angel
Having an old friend or colleague who’s worked with you before and knows you well is a distinct advantage…the level of trust is already established. You are each a known quantity to the other and this eliminates much of the strife that might otherwise exist in a new relationship involving investment. The value of enjoying the support of this angel is the message it tells other investors and business associates about your reputation as a business person and the validity of your business concept. The limitation is that this person may not have more value to offer after the initial funding.
- The Blood and Water Angel
Family and friends are often the first people we think about when looking for financing. Perhaps you’re fortunate to have family and friends with disposable cash they’d be willing to invest in your company. If so, the blessing of being funded by them, like the professional friend angel, is that they already know, like, and trust you! An amicable investment relationship might go sideways, though, if they become involved in the business without your invitation. They may believe your familial or personal relationship entitles them to interact. In addition, they may not have any expertise in your business’s industry, and might interfere inappropriately.
- The Angel Group
You might find groups of angels who band together and make group investments, or who enjoy being pitched as a group much like the investors on Shark Tank, the television show. On the positive side, you’ll be able to pitch your idea to a number of investors all at one time. On the other hand, if one investor has a negative attitude about your products or services, the other investors may follow that person’s lead and can your proposal.
In my next blog learn about the other five angel investor types. You’ll meet the Safari Angel and the Where Have You Been All My Life Angel…plus three others!
To learn more about Joe Maas, view his Paladin Registry research report.
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