The angel investor uses their personal finances to make investments in the businesses which operate on a relatively smaller scale with high growth opportunities. Angel investors buy the shares of a company and provide investments in the form of equity finance. They also have the decision-making powers in the business.
Other than the finances, the angel investors provide their skills and expertise to the business and make their decisions on their own. They don’t need any help in decision making from the externals. Decision making is done through online portals or by face to face meetings.
An angel investor normally seeks a chance to buy the shares of a company and get a return for their investments. Return payback time is normally between 8 to 10 years.
The Risks of Angel Investing
Angel investment is riskier than other types of finances and according to market research that has been conducted recently. About more than 58 percent of the angel investment deals don’t get the original invested money.
However, to mitigate the level of risk involved in the deal, you can go for a diversified investment portfolio. It can be done by seeking investments from different sources and by being capable enough to understand what the angel investment process really is.
Other than the risks, the angel investors can also be benefited from the schemes called enterprise investment scheme. It grants multiple tax advantages to the angel investors so that their risks could be mitigated to a certain level.
A certified high net worth individual
You must confirm that
- You have the net income more than £100K
- You have the net assets more than £250K that is other than the pension you receive.
OR
A Certified sophisticated investor
You need to confirm that you have been a director of any company and from the recent two years the company had earned more than £1 million
You have made investments in any unlisted company. The minimum number of investments is one. · You have worked in a private equity department in the last two years.