It is true that not every aspiring entrepreneur is lucky enough to secure the funding they so desperately need to realize their business ambitions. In fact, many investors are often unaware of what online loans have to offer, or may not be eligible for the same. That’s where angel investors come in. Angel investors are successful business gurus who specialize in backing startups. It may appear like the best option compared to loan capital, but the angel investor option is not without flaws. To help you make a decision on whether to take this option, here are the pros and cons of using an angel investor to fund a startup. Let’s start with the pros
- You get capital, not a loan
Probably, this is music to the ears of an aspiring entrepreneur. When you land an angel investor, unlike the banks and other conventional lenders, you don’t need to worry about repaying irrespective of the outcome of the venture. What could be better than that? In any case, that money was nowhere near your sight. All your angel needs is a piece of ownership stake so you both benefits when the business takes off.
- Willingness to take high risks.
We’re all aware that few of the startups see past the five years from the time of their launch. No wonder most of the financiers chicken out when it comes pumping their money into such ventures. The case is, however, contrary to angel investors, It is this reality that sets them apart from our conventional lenders such as banks who only commit their funds where returns are guaranteed. Angels are more futuristic and place their trust on the ambition of the individual. Therefore, all you need is to convince them by plotting a clear plan for them.
- Offer investment advice
Seeing that most of them rank top among business people, angels have much to offer other than finances for a startup. With the great experience they have accumulated in their line of work, they can furnish an entrepreneur with invaluable guidance to kick-start the business. Moreover, they can also link you with prospective experts to propel your idea even further. Considering that they seek to pump in their money in your business, it’s all fair to accept that they would want nothing but the best outcome in the long run. That is why you should treat their inputs with utmost respect and recognition.
Let’s now look at the disadvantages of angel investors.
- Less investment capital
In as much as it’s not a loan, you will find out that most of the angel investors are smart enough to protect their financial base. Unlike other financial institutions, we expect this considering that this is an individual sacrificing personal money for your venture. Mostly, they put in amounts that rarely go beyond a million. Therefore, for anyone looking to launch a mega venture that demands millions of dollars, angels may not be the best alternatives.
While opting for the angel investors, it is essential to have it in mind that they may want a say in how you use their money. Sometimes, some of them may come with excessive demands on the course of the venture which may trigger conflicts. Such a possibility is crucial for you to consider especially when control is one of your priority.
Online loans might sometimes prove a better option than angel investors if you are willing to take the risk. Numerous companies, such as Northcash offer various lending options to young entrepreneurs as long as you come up with a strong business plan.