As an entrepreneur, one can source funding from multiple channels like crowdfunding, venture capitalist, financial institute loans, IPO’s and not to forget the latest buzz of angel investors.

An angel investor is an experienced, independently wealthy, high net-worth individual. They have funds from previous successful investments or inheritance that they invest in new ideas and startups to assist new entrepreneurs to succeed. They put capital into a business that is starting up, based on their calculations and forecasts regarding its potential viability and future success.

There is no limit to the amount an angel investor can fund. The values typically start from 50000 USD and can go up to a million dollars depending on the value the investor gauges in the idea.

So, as an entrepreneur why should you lean towards angel funding for kick-starting your idea?

Let’s look at what the angel investor brings to the table.

In the early stages of your company’s development, it’s can often be hard to secure a bank loan or other traditional form of funding. In case a loan is approved and disbursed timely, the monthly outflow in the form of repayments can be a strain on the requisite cash in hand. Angel investing is unique in that it provides capital in exchange for a stake in your business and there are no or minimal repayment terms. In essence, all the funding you have access to can be applied to grow your business. This arrangement accelerates business growth and is desirable for both parties.

The extra plus they inherently get in is their expertise. In addition to accessing their network and expert insights, you’ll also be able to tap into an investor’s knowledge and experience in the same field as yours. It is favorable to find an angel whose business experience resonates with your venture. It is possible that they have experienced successes or failures in similar areas and will guide and advise for success.

The connections that the angel can help you build to advance the business line are prodigious, due to their standing in society and networking skills broadly. They can open up avenues for you to further financial sources, potential customers, suppliers, and other relevant contacts.

An angel investor can liquidate returns on their funds only when the startup is successful. This motivates them to add value in business decisions, clear market hurdles wherever possible, and push it towards success, unlike a venture capitalist or lender whose involvement in your success is of lesser concern. This brings us to a significant aspect of angel funding. The money invested by angels gives them a portion of the ownership in the company where they become part owners, inherently wishing it a success. In the case of debt financing, the risk for the entrepreneur is much higher, as every dollar borrowed attracts interest and needs to be returned periodically within a stipulated period of time. The hanging sword of the debt along the ticking clock can unnerve the best of startups especially during the nascent stages, where uncertainty and pitfalls are common.

Now, with the excitement and anxiety to get your startup to fly, there will come times when your business needs further funding. The scenario may not lend itself well when borrowing funds from financial institutions or crowdsourcing funds. The angel investor who may have already invested in your cause after evaluating its success potential will find it convincing to further top up the capital when your startup faces a cash crunch. They can also help connect with other like-minded angels, by personally reaching out to their network and adding credibility to your venture as they do so. It mitigates your risk of running low on funds at critical junctures, where the funds make or break your success.

Angel funding also reduces the risk of losing control of your companies decisions and operations compared to borrowing from financial institutes and venture capitalists. The red tape one has to navigate in cases of traditional borrowing can derail growth plans. Traditional investors are focused on the faster returns irrespective of the growth and success of your startup and end up interfering rather than adding value to the precious decision-making timelines. It may sound counter-intuitive when the dominos effect is obvious. However, in the case of an angel investor, they are invested not only financially but also with mind capital, propelling the business to build higher value. They appreciate the importance of quick decision-making and policy based on trust and goodwill.

An angel investor-entrepreneur relationship is nurtured long-term and is built on mutual trust, thereby cushioning you from the traditional risks of financial lending. It is not confined to a single funding-exit-profit scenario and leads to subsequent opportunities where both parties enjoy the fruits of success.