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Structuring Angel Financing Article
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Essential Information on Angel Investors Stage
from:Angel investors are accredited investors who are capable of making cash investments in private businesses. Like any other institutional venture capital firms, angel investors take equity in exchange of the investment they make. The only difference is that investments made by angel investors are often smaller than the ones made by venture capitalists. This makes them the best financing option for companies that have already turned to their family and friends for financing but are not yet ready to approach venture capitalists for capital. But angel investing has different stages. So if you are looking for angel investors, you have to know the angel investors stage.
Stages of Investing
There are five stages of angel investing. These include the angel investor pre-seed stage, seed stage, early stage, expansion stage, and later stage.
The angel investors pre-seed stage is the idea stage. Here, your business is like an egg that has not yet hatched but the incubation process is expensive. Before you even launch your business, you need to make thorough research, place lots of phone calls, and buy supplies needed in the business and these would mean you have to spend thousands of dollars on these. You can ask family and friends for assistance in this stage. However, if they are not capable, you can rely on angel investors to finance you even at this conception stage.
After the pre-seed stage, the angel investor seed stage follows. Almost 44% of the total number of angel investors makes their cash investments in this stage. In angel investor seed stage, you establish your team, create plans, and develop prototypes. And again, these would mean that you have to spend for these processes. If your family and friends were able to finance you during the pre-seed but are not anymore capable for the seed stage, you can turn to angel investors to provide you with the amount that you need.
Once the plans, prototypes, and teams are developed and established, the angel investor early stage follows. Most angel investors make their investments in this stage because here, initial revenues are achieved. However, there can also be a negative cash flow so if you need more capital, angel investors will provide funds for your business.
As your business starts to grow, your need for cash also increases. At this point, perhaps you think of expanding your business. In angel investor expansion stage, your capital requirements also start to increase since you may consider putting up a new branch or introducing new products or services. You might not be able to fund your business expansion yourself so you have to look for angel investors who may be willing to take the risk and provide you capital.
And the last stage, which is the angel investor later stage, is the angel investing stage which has the smallest percentage of angel investors who make cash investments. This has the least because often times, businesses are already established in this stage and will not anymore need financing. However, if you think of investing in bonds and pre-IPO at this stage, angel investors can make cash investments in your business.
These are the different stages of angel investing. Before you look for an angel investor, you have to carefully look into these first and decide which angel investor stage you need funds most.
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