Disadvantages of Angel Investment
1. Shared Authority: One possible requirement of a few angel investors in India is a substantial ownership stake (shared authority). Consequently, you might ultimately sell more products than you initially intended. As a consequence, your ownership diminishes, and future business fundraising efforts are hampered.
2. Time and Effort: It is crucial to consistently be ready for the lengthy and tiresome process, as it requires the submission of documentation such as financial statements, statements of cash flow, financial reports, bank statements, and other relevant documents.
3. Contingency Funding Rejection: Despite one’s confidence regarding the innovative product or exceptional growth potential of the company, there is an inherent risk associated with seeking funding.
4. Prospectively Unsuccessful: Employing an individual without performing adequate research could result in financial consequences. Therefore, you must request that your investor provide referrals. For funding, it is preferable to speak with firms with which they have previously collaborated. An angel investor must be dedicated and diligent in order to collaborate with you rather than simply seeking financial repayment.
Angel Investment : Meaning, Working and Types
Angel Investment refers to the financial support provided by individuals, known as ‘Angels’, to startup companies in exchange for ownership equity. Angels typically offer more flexible terms as compared to traditional funding sources and often play a mentorship rope in addition to providing capital. This form of investment is crucial for many startups to kickstart their operations and growth.
Key takeaways from Angel Investment:
- Angel Investment provides startups with crucial early-stage funding.
- Beyond capital, angels often bring valuable industry experience and networks to the table.
- For angels, investing in startups involves a higher level of risk due to the uncertainties associated with early-stage ventures.
Table of Content
- Who is an Angel Investor?
- How Does Angel Investing Work?
- Types of Angel Investors
- Sources of Angel Investing
- Tips for Startups Before Approaching an Angel Investment
- Advantages Of Angel Investment
- Disadvantages Of Angel Investment
- Difference Between Angel Investors and Venture Capitalists