Startups are difficult! They have a long way to go from finding a solution to kickstarting and securing funds. When a startup company needs funding, angel investors can help. But that's not the most important benefit of having an angel investor on board.
Angel investors are experienced and have adequate knowledge to provide you with guidance and mentorship, which are often helpful during the initial years of the business. But, before you go ahead with an angel investor, make a thoughtful decision based on the pros and cons given below:
Pros:
1. Ready to take risks
While a bank might not be ready to invest in your business idea, or even if they do, they might limit the quantity of funds. But, when it comes to angel investors, you can expect them to invest without any limits or restrictions. This is because most angel investors have experienced their own entrepreneurial phase that involves risk and often know which idea could be successful.
2. You don’t have to pay back
Yes, the title may sound shady, but it is not. While a bank or other financial institution will eagerly wait for your repayment, angel investors, on the other hand, wait eagerly for your business to take off. Why? Because they expect you to offer an ownership stake in your company. Furthermore, if your business does not operate as predicted, you will not be required to pay back.
Cons:
1. Conditions apply
Offers are always good unless they have conditions. The same is the case with angel investors. While it is perfectly true that you don’t need to pay them back, handing equity instead also means giving away a part of your future net earnings.
2. They have a say in your business
If you are possessive about your business, this will not sound fun. However, since the angel investors are spending unlimited investments, they are going to take part in how you move forward with your business. They will also want to know how you are spending their money. As someone who wants an angel investor, you must be willing to let your investor take an active part in your business.
Conclusion
Entrepreneurs who are uncomfortable with the idea of allowing their investors to have potential control over their businesses are rare. If you are someone who is comfortable with the idea, angel investors could be a fantastic fit for your company.