Types of Angel Investors As It Relates to Small Business Investments

There is a large misconception that there is only one type of angel investors. However, there are many different attributes that make these individual funding sources very different from each other. This is primarily due to the fact that many angel investors have varying investment objectives as it relates to what they want in a small business investment. Foremost, the wealthiest of these funding sources are looking to make large scale investments into small businesses as they want to generate the highest return possible on their capital. Additionally, these investors typically do not want an ongoing stream of dividends paid to them on a monthly or quarterly basis. However, private funding sources that do not have a substantial amount of small business investment capital are more focused on generating a recurring stream of revenue from your business. As such, it is important that you focus heavily on the type of individual funding source that you intend to work with as this may impact certain aspects of your business including your cash flow analysis and profit and loss statement.

If you are working with a smaller angel investor then you are going to need to factor in the ongoing payments that are associated with your business. As such, you may not have enough capital on hand in order to make appropriate reinvestments into property, tangible assets, equipment, and expanded working capital. If your business has solicited capital from a wealthier investor then you may be in a much better position to make substantial reinvestment into your business while generating a much higher return on the equity of the business. Additionally, one of the benefits to working with a high end private funding source is that you can always go back to them with additional capital requests in the future. They will most likely have the appropriate capital on hand in order to assist you with aggressively expanding your growing business.

In closing, it is very important to discuss exactly the type of angel investor that you intend to find as it pertains to your start up business or expanding venture. It is imperative that you profile anyone that expresses an interest in regards to providing capital to your business on a one time or ongoing basis. Of course, we always recommend that you work closely with appropriate counsel that can assist you in making these determinations as it relates to your ongoing business operations. Additionally, you are going to need to make an appropriate examination of your business as it relates to your total capital needs.