Angel investors are rich individuals who can help young enterprises and start-ups get off the ground financially. Angel investors in Indonesia, or anywhere in the world, frequently purchase a portion of a start-up’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 start-up’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.
2. Venture Capitalists
Typically, venture capitalists do not invest their personal money in start-ups. 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% to 35% return on their investment.
Advantages and Disadvantages of Being Financed by Angel Investors
The advantages of having an angel investor are:
While there are advantages of such an investment, you should also consider the downsides:
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.
FAQs
Carried interest, or “carry” Normally investors make money on the percentage of the company that they own — e.g., taking 1% of the selling price if they own 1%.
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.
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.
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.
