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The Top 4 Reasons Angels Make the Investment
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Early stage investing, such as angel investing, is a very risky business. Unfortunately the majority of the angel investments that are made don’t offer dividends and overall are failures. With these statistics why do angel investors continue to make these investments? Here are four reasons as to why angel investors take these incredible risks.
Solid ROI
While there are many difference here, similar to options in the fact that there is a certain level of volatility during the early stages, the downside of the investment is that the investment is only limited to the money that was invested, however the upside to these investments is that if the investment is successful and the investor is given an equity share the ROI is limitless. Should a business that they have invested in make it big they are able to earn more than they invested and they forget any failures they have had.
Personal and Business Relationships
Most often entrepreneurs, especially those that are repeatedly starting new business ventures, have an established list of business associates that can speak to their track record and provide support. Friends and family are also likely to invest because there is a higher level of trust between people that have a history together. They also know how you manage your business and other projects and they will be able to let the angel investor know whether or not making the investment with you is a good idea.
Angel Involvement
The truth is that the majority of angel investors out there are also accomplished business professionals who believe that the skills they have can help the person whose business they are investing in. If they feel as though they are the missing element in your business for it to be successful then they are going to be more apt to make the investment in you, both financially and talent wise. That is called human capital and it provides a great benefit along with experience to help your business/ideas flourish. Don't make the mistake in seeing it as an intervention, it is actually valuable assistance.
Risk and Reward
The very first thing you are taught on day one of finance class is that an investment that is high risk must yield higher rewards. Most angel investors love the risk that is involved in the angel investment game. They understand that in order to make huge financial gains they have to take huge financial risks, the potential of the huge payout is what attracts them and makes it difficult to reject. |
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