What is an 'angel investor' and how do they help businesses?

For entrepreneurs looking to start their own business, one of the biggest hurdles is finding funding. Of the many resources available to budding entrepreneurs 'angel investors' offer a unique opportunity: rather than going through a bank for a loan and then paying off the loan plus interest, these private funding sources will often seek involvement in companies at early stage or start-ups in exchange for an equity ownership interest.

The typical angel investment is between $25,000 and $100,000, but can go higher depending on the company. For entrepreneurs who want to avoid dealing with the banks and loan approvals, angel investing can cut out the middleman. But since angel investors are investing their own personal money into a business, they often are more stringent about having a well-articulated business plan in place. An angel investor might ask a business owner:

• Do you have detailed financial projections for the next two years?
• What key cost components are there for the product or service?
• How does the company market or plan to market its products or services?
• What advertising will you be doing?
• How many employees do you have?
• How do you plan to scale the team in the next 12 months?

The angel investor's role in the company may vary: Some investors are satisfied with simply a financial interest in the company, leaving the day-to-day operations to you. Others may be looking to take a more active part in shaping what the company will be so as to protect your investment.

Hammering out the details of these partnerships is the specialty of The Law Offices of Donald W. Hudspeth, P.C. Our Arizona business attorneys can help you get your business off the ground and handle all your legal needs. 

Categorised in: Business Law, Starting a Business in Arizona

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