Find out how they invest and what motivates them – CableFree TV

Published by
Peter Kavinsky

Not all angel investors, and not all business angel groups, are created equal. Some have earned a reputation for delivering phenomenal value by being staunch allies to founders as startups grow and helping them find expertise or resources through their networks.

However, you also have some who are notorious for being a nightmare for the tables, interfering, setting unrealistic requests, or completely unavailable when necessary.

For many entrepreneurs, business angels can play a key role, whether they are good or bad investors. In the current fundraising environment, the importance of angels has only increased. While conditions have remained favorable for founders in the first half of 2022, seed stage valuations are reported to be declining, with some investors taking longer to make decisions, anticipating higher levels of traction at each funding round.

Angels are everywhere

One grain of optimism that founders should keep in mind is that the state of “early-stage” capital has improved significantly over the past decade, with more angel investors and more venture capital funds than ever before. It is reported by The Angel Capital Association. 278 groups of angels as members, with dozens of other North American groups operating outside the association (that’s more than double the number of angel groups ten years ago). The European investment community has also grown and strengthened, with the European Business Angels Network reporting 60 angel groups from 41 countries as members.

In addition to financial returns, many business angels have a second or third motivator that encourages them to invest in startups.

Although angel groups are easy to identify through public websites and formal investment processes, they actually represent only a small fraction of the total estimated number of active angels. Many angels do this alone or invest with a small list of friends who are not part of any formal group. The Center for Venture Research estimated that there were 363,460 active business angels in the US. in 2021 to invest in 69,000 startups, which is 2.9 times more than the 124,900 active business angels reported in 2011.

Despite this growth, founders should carefully consider their fundraising strategies and look for any ideas or investor advantages they can find to maximize their company’s potential. More angels also means more complexity, and entrepreneurs need to navigate that complexity and determine which investors are truly worth the time and money.

How Angels Think: Identify Their Secondary Motivator

Almost all business angels want to make money. Although many of the best business angels mentally write off their investments as soon as they make them (realizing that the chances of them ever paying off are slim), they still hope that their investments will be successful. But in addition to the financial return, many angel investors have a second or third motivator that encourages them to invest in startups. After all, there are many easier and more liquid ways to invest than in startups.

As a founder, identifying these other motivators can help you better resonate with a potential investor. Understanding the angel’s motives can also help you assess whether you want this potential investor to be part of your company for years to come.

So, what are the most common motives of angels besides making money?

Pay in advance

Peter Kavinsky

Peter Kavinsky is the Executive Editor at cablefreetv.org

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