The pros and cons of using Business Angels for startups

May 2, 2018

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The pros and cons of using Business Angels for startups

Posted in : Business Services on by : Josh

Angel investors have specialised in investing in other businesses by offering financial assistance to both small and mid-size startup companies. Though the “Angel Investors” work to give solutions to the entrepreneurs and companies in need of its assistance, There are also drawbacks that can come from this method of acquiring investment. Here are some of the pros and cons that may come with the Angel investment.


Pros

Risk Takers

With most of the angel investors being entrepreneurs themselves, they are able to look at the risks involved with the business and still invest in it. It is very different with the way banks deal with risks that may come your way in the business. In most cases, the banks will offer loans that are limited to curb the possibility of a loss that they may incur in the process. With the angel investors, they are able to know when the deal is good and also the idea. If you can find local angel investors then even better. So let’s say you need business angels Milton Keynes, why not search online and see if there are any suitable individuals in your area right now.

They do not give loans

The angel investors offer you the capital that you need to start the business and in return, they will receive a percentage in the company. This way the Angel investors, are able to benefit from the investment. In case the business fails, you will not be expected to pay back the money invested in your company as with other financial institutions.


Cons

High expectation

Before going for the Angel investors, you might want to determine if the startup will be able to move at the rate that they may be required of you. It may include expanding the business and also if you can withstand the intense pressure that it comes with. This is due to the fact that they are also in business to make money. Therefore, there are high expectations from the beneficiary of the investment since there are a lot of funds in the line.

The investment comes attached strings

Since the stake of the business that they investing depends on the funds placed, it could be difficult for you to claim the money of the business being successful. It is, therefore, important to look at the proposed terms to ensure profitability for you and that the investment does not eat into your share.

Overall, we’ like to say that not all business angels are out for themselves. It’s all about finding the right individual, someone who can help you and push your business forward so you both reap the rewards. Think of an angel as more than a form of investment. It’s a business partner who can help you reach the next level and potentially make a successful business that leaves you both happy later down the line.