How To Get Into Angel Investing

angel investorOnce the TV show Shark Tank became so popular, Angel Investing has become a common practice for private investors. The question is, how does an individual get started with angel investing? And can one get wealthy from angel investing?

What Is Angel Investing?

Angel investing is the opportunity for individual investors to essentially buy into a business. The cash investment is provided in exchange for a share of ownership. Investors can select to invest at the start-up of the business or once the concept has been proven and it is time to expand.

This can be done on a personal level, in that the investor provides an influx of money to friends’ or family members’ businesses. Oftentimes, angel investors are looking for 20%-25% of your profit; however, it can vary depending on the investor and opportunity. It is crucial that both parties agree on the details and get them documented with a formal agreement prepared by a lawyer.

Alternatively, an investor can be accredited by the Securities and Exchange Commission.  This gives investors access to opportunities via more formal platforms. These investment “groups” vet and provide details for investors to find and select opportunities based on their preferences.

The base requirements for this personal accreditation are a million in personal assets and/or at least $200K (individual) or $300K (married) in annual income. The Angel Capital Association is a great resource for becoming formally accredited and staying abreast of the latest requirements and news.

How To Get Started as an Angel Investor

Once you have received your angel investor accreditation, you can select a platform to guide you in selecting and managing investment opportunities. The are quite a few options. Here are a few options for your review:

  • SeedInvest.com – This platform does not require an investor to be accredited through the SEC, they do verify your status and then provide thoroughly vetted investment opportunities. A new investor can typically expect to receive quarterly updates on their investment portfolio.
  • Angel Capital Association (ACA) list – The ACA maintains a list of accredited investment groups. You can join their mailing list to find out more.
  • Crunchbase – As an investor, you can utilize the Crunhbase database to filter investment opportunities “based on headquarters, industry, investment size, and more. Get recommendations based on your specific criteria sent to you automatically.”

SCORE, a 501(c)(3) nonprofit organization and a resource partner of the U.S. Small Business Administration (SBA), offers a variety of resources for potential angel investors and business owners alike to learn more about becoming one and access angel investment funds.

Investor beware

Now be aware. For the most part, angel investing is a long game. It is not a get-rich-quick strategy. On average, angel investors are looking at 10 years before they can pull out with a rewarding investment.

And for the business owner, angel investors are a lot less risky than debt financing. Unlike a traditional loan, an investment is not paid back should the business fail. Most angel investors thoroughly understand the ins and outs of business and take the long view.

Finally – if you want to look at someone who is a serious investor, consider researching the history of Warren Buffet. Buffet is worth billions, most of which he gained from his investing prowess, which is unique.  Most investors make far more mistakes.

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