Angel investors are rich individuals who can help young enterprises and startups get off the ground financially. Angel investors in Indonesia, or anywhere in the world, frequently purchase a portion of a startup’s stock and will contribute a considerable sum of money to help a new venture get off the ground.
The amount contributed by these investors will vary depending on the startup’s demands and the industry in which it operates. Angel investors are frequently the preferred investors of firms that do not fit the standards for bank financing and are unable to entice a venture capital (VC) firm.
Differences Between Angel Investors and Venture Capitalists
All investors can be divided into two broad groups – angel investors and venture capitalists. People who invest in nascent enterprises are known as angel investors and venture capitalists. When they invest their money, they both take calculated risks in the hopes of achieving a high return on investment. There are some key differences between angel investors and venture capitalists.
1. Angel Investors
Angel investors are licensed investors who invest in small firms using their own money. This should come as no surprise given the fact that many angel investors are also small business owners. They prefer to make investments that will help them grow their company rather than those that will yield profits quickly.
The reason why angel investors choose specific businesses to invest in is because they expect the business to become lucrative in the future. As a result, angel investors tend to take greater risks than venture capitalists.
Another significant distinction between angel investors and venture capitalists is the quantity of business cash that both types of investors often contribute. The average angel investor contributes US$330,000, according to the Small Business Administration, which is significantly less than the average venture capitalist investment. Angel investors and venture capitalists have distinct expectations for their investments. Angel investors typically expect a 20% to 25% return on their investment.
FUN FACT: Some of the industries in Indonesia that are more conducive to angel investors includes: F&B, IT, Mobile Technology, Cosmetic, Education etc.
2. Venture Capitalists
Typically, venture capitalists do not invest their personal money in startups. The majority of venture capitalists invest in already-established enterprises. As a result, the danger of investment losses is reduced.
Angel investors invest far less money in enterprises than venture capitalists. According to the Small Business Administration, the average venture capitalist invests about US$11.7 million. Angel investors often expect better proportional returns on investment than venture capitalists. Venture investors often demand a 25 percent to 35 percent return on their investment.
Advantages and Disadvantages of Being Financed by Angel Investors
The advantages of having an angel investor are:
The business owner does not have to return the money invested to the angel investor if the business fails. When compared to taking out a loan, getting financed by an angel investor poses far less of a risk to business owners.
Angel investors’ investments are typically mutually beneficial because they are looking for a personal opportunity as well as a financial return. In debt financing, the financial institution from which the business owner borrows money has no authority over the organisation’s administration and activities. As a result, these institutions will not receive any revenue.
Angel investors also contribute to a firm by sharing their expertise and skills. Although angel investors assume enormous risks, if all goes well, the returns can be highly profitable. Unlike lending institutions, angel investors are not required to be paid on a monthly basis.
Angel investors are becoming more widespread, making it easier for a business owner to interact with one
While there are advantages of such an investment, you should also consider the downsides:
The loss of autonomy is the fundamental downside of being supported by an angel investor. The owner of the company will relinquish his entire authority. Any proceeds will be split equally between the business owner and the angel investor. Working with an angel investor can be pricey in this regard.
Some angel investors are shady as well. They may appear to have the startup’s best interests at heart at first, but their true goal is to seize entire control of it. Even when it is essential, angel investors do not always give more funding for the organisation’s development.
How do I become an Angel Investor in Indonesia?
Those who have the financial means may be interested in becoming an angel investor in Indonesia.
Have good psychological awareness. It is important for angel investors to understand what the business owners with whom they work will be thinking at any given point in time.
Avoid acting too quickly. Making an unnecessarily impulsive decision could cost the angel investor, the business with which the angel investor works, or both large sums of money.
Think about joining an angel investors’ community. By doing so, the angel investor will be able to interact, brainstorm, and collaborate with fellow angel investors. Some of these angel investors may even choose to make investments a small group instead of doing so individually.
Organize and manage cash well. Failure to do so could bring about the financial ruin of the angel investor, the associated business, or both.
Invest carefully and skillfully. The choice of investment made by the angel investor often makes the difference between one’s success and failure in the position.
It should be kept in mind that one does not have to be an angel investor to invest in an Indonesian company.
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For example, in 2013, angel investors Paul Buchheit and Jeff Clavier were among those listed by Forbes for giving a footing to many successful startups. As a part of a firm, Paul had invested in around 61 companies such as Reddit, Dropbox and Airbnb.
Are angel investors rich?Tiwi2021-12-27T09:27:04+08:00
Angel investors are also called informal investors, angel funders, private investors, seed investors or business angels. These are individuals, normally affluent, who inject capital for startups in exchange for ownership equity or convertible debt.
How much money do you need to be an angel investor?Tiwi2021-12-27T09:26:10+08:00
What is an angel investor? Angel investors are typically high net worth people who fund startups or early-stage businesses. Many are accredited investors with a minimum net worth of $1 million or at least $200,000 in annual income.