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5 factors to consider before you become an angel investor to startups

Dec 27, 2019 | 7 months ago | Read Time: 3 minutes | By iKnowledge Team
5 Factors to Consider before You become an Angel Investor for Startups

It is natural for entrepreneurs to be concerned when they plan to raise outside capital for the first time. It is a decision for the strong-hearted, despite today’s investors being smart, capable and diligent. In the same way, investors also check for certain factors before putting in their hard-earned money into a startup.

But before, we look at the important factors that angel investors must consider for funding, let’s first understand who angel investors are.

Who are Angel Investors?

An angel investor is one who invests his/her money to fund new companies spearheaded by entrepreneurs. Through their money and expertise, they help in building successful start-ups. These investors generally put their money into equity shares of a company and then wait for the value of the share to rise, so that they can sell those and gain profits. In short, the augmented price of those shares is their return on investment.

Factors to consider before investing in a startup

1. A dependable and capable team

Angel investors are most likely to invest in good people, rather than just ideas. This is the reason why it is important to work with someone who they either know personally or has been referred by their network. This helps in building trust, credibility and works well in the long run.

Besides, since angel investors work directly with the team, it will help if the team members are on the same wavelength. It is important that the team has a proven track record of delivering goals and maintaining timeliness that becomes crucial for a startup.

2. A completed business plan

It is important to check if the startup has a clear and complete business plan, right from the business model, market conditions to its competitors. Everything needs to be laid out and must be transparent for both parties to work well.

It is believed that if an entrepreneur does not have a business plan, then he’s bound to fail. It isn’t that a business plan is a license to success, but it gives a reassurance that there’s scope to succeed. Besides, make sure that the business has been analyzed through market research and other surveys.

3. Value propositions of the products and services

It is also not uncommon to see investors putting their money in companies where a large market for the product exists. Entrepreneurs should develop a product that has some value proposition, which will eventually lead to the success of his company by acquiring a customer base. Once the customers are ready to pay for products, then there’s no stopping for the company to grow.

 4.State of the industry

As an investor, it is important to study the dynamics of the industry, if it’s ripe for disruption. Sometimes, such investments can prove to be rewarding, but can also backfire if proper research is not done. It is advised to take a step back and understand how the market conditions are for your chosen industry and identify its biggest pain points, such as increasing prices, service issues or even the inability to satisfy demand.

5. Understanding the Risk

Lastly, look out for an entrepreneur who’s passionate and hopeful, however he/she should also not be averse to risky situations. Those entrepreneurs who push their startup without taking into consideration the motivation and concerns of the angel investor must be kept at bay.

Though investing into a startup is a mix of rewards and challenges, it is not for everyone. It does come with its share of uncertainties and not every person is ready to take this risk. In case you are looking at investment options, there are companies such as Aegon Life that offer plans to maximize the returns from your investment. You can choose from a range of six plans, based on your needs and requirements.

There’s a world of opportunity waiting for you. Take an educated decision and reap rewards! To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.


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