The Advantages of Having an Angel Investor

November 23, 2015
The Advantages of Having an Angel Investor

We are not talking about celestial angels, but angel investors could help you take your business to unimaginable levels of success. If you are a new entrepreneur or are in charge of a startup, you probably have an innovative idea that needs financing.

In the early stages, new entrepreneurs rely on savings, personal loans and credit cards to finance the development of an idea. But there comes a time when this money is not enough and you have to turn to third-party sources. This is when angel investors enter.

What is an angel investor?

“Angel investors are people with a high level of capital who invest in companies that are in early stages of development. These companies need capital to develop their product as a business model,” explained lawyer Francisco Pericás, Executive Vice President and Director of our Corporate Banking Division.

Who looks for an angel investor?

These investors often provide businesses an average of between $150,000 and $1 million in financing, but they are also available for smaller transactions. In general, they are looking for a well thought-out idea that has room in the market for development and expansion in the future.

To capture an angel investor’s interest, the entrepreneur must develop a detailed business plan with clear and viable objectives and projections. Similarly, the entrepreneur should have a prototype of a product or service that the business will offer.

At the same time, because his interests are also at stake, the investor will seek to get the product or service exported to markets that would be difficult to reach without his help. In the United States, for example, about $23 billion is invested annually by angel investors.

The advantages of relying on an angel investor

An angel investor practically becomes your partner. By investing money, he becomes a shareholder, or part owner, of your company in various proportions, which can range from 10% to 50%, depending on the business or the agreement.

According to Pericás, another advantage of turning to an angel investor is that he brings deep understanding and advice to the business. Generally, they are people who are experienced in finances and managing a company.

In Puerto Rico, the community of new entrepreneurs is growing. Activities are often held in which beginning companies, also known as startups, are invited to present their products and services. Angel investors often come to these events and they sometimes approach entrepreneurs, so it is important to make an excellent presentation of the product or service.

If you have an innovative idea but don’t know how to execute it financially, angel investors could help your plans.