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What is an angel investor for a new business?

Angel investors provide a unique funding option to get a new business venture launched. Entrepreneurs should understand how angel investors operate and how they differ from venture capitalists or other funding sources.

Across many industries, Oregon’s entrepreneurial spirit remains strong growing. When looking to get a new venture off the ground, leaders must find sources of capital to fund their operations and give them room to grow.

Angel investors offer one option to fund a developing business, but they operate quite differently than venture capitalists.

Investment for ownership or control

As explained by SmartAsset, a venture capitalist generally opts to invest in a business with an eye on realizing a positive financial return down the road. A venture capitalist may have little to no say in how the business operates.

In contrast, an angel investor generally invests in a business in exchange for a share of the current or future ownership. Entrepreneurs should be aware of this and evaluate their readiness to cede some power in exchange for the investment.

A stake in the business success

Entrepreneur magazine indicates that in addition to financial support, angel investors frequently bring valuable business expertise or customer connections to the table. The relationships or experience offered by an angel investor may be as important as the money invested in the long-term success of the new company.

Finding angel investors

Connecting with angel investors may occur in many ways. Some online platforms provide a means of matching potential investors with new businesses and entrepreneurs. Networking and professional events may also offer avenues to learning about angel investors that may be a fit for a new entity.

In some situations, a close friend, colleague or family member may emerge as an angel investor for a particular startup. Care should be given to managing and preserving the already existing relationships prior to agreeing to an entrepreneur-investor relationship.

Presenting to angel investors

Because an angel investor invests in the development and success of a product and a leadership team, an entrepreneur should direct their pitch to potential investors on the overarching relationship rather than adopt a hard sales approach to the conversation.

Leaders should thoroughly research potential investors before meeting with them to glean insights into the viability of working together. Research may include past ventures funded as well as the professional roles an angel investor may have held separate from as an investor.

Professional guidance along the way

Oregon business leaders interested in finding an angel investor should consult with an experienced business law attorney before entering into any final agreement. This provides entrepreneurs with the objectivity needed at a critical time in the development of their new companies.

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