BUS 463: Entrepreneurship Feasibility and Analysis
Alternative source of capital to venture capital
The paper comprehensively and candidly discusses the angel investors as the apparent alternative source of capital to the venture capital. Angel investors are accredited investors who offer financial backing for early stage of a business and who are increasingly significant sources of capital.
The rationale behind Angel investors
They are Calculated Risk-Takers: it can be noted that Angel investors and venture capitalists actually differ. Venture capitalists are seldom the first to invest in a business, whereas most Angels are prosperous entrepreneurs who have made money in their prior businesses, and are tranquil eager for the problematic solving that arises from working with startups (Prowse, 2015).
This is the reason as to why Angel investors are normally pursued out for early-stage funding; they are enthusiastic to take this calculated risk, grounded more on the possible of the entrepreneur than the factual value of the business.
They Provide Mentorship: a part from cash, Angel investors play the significant function of “mentoring” to the entrepreneurs they capitalize in. This means they are giving their contacts, best practices, skills, hands-on know-how and more to their founders.
They Work Together: It has converted more common for Angel investors and Angel groups to syndicate their deals, permitting associates to pool capitals. There is a lot convoluted in syndication, but eventually it offers startups with extra funding and brain power. Syndication also hints to more mentorship and cooperation for the investee corporation; giving a startup extra legality for follow on capital. As well, it permits Angels to work beside each other, which generates a valued network of investors from coast-to-coast.
The angel investors evaluate the business through traction. They want a startup investment to have real concept proof. If the business can exhibit a positive feedback, growing revenue, high user retention in early stage, then it provides the venture (Collewaert, 2012). The more traction the business has, the more proven it appears and hence less likely to fail in future.
Collewaert, V. (2012). Angel investors’ and entrepreneurs’ intentions to exit their ventures: A conflict perspective. Entrepreneurship Theory and Practice, 36(4), 753-779
Prowse, S. (2015). Angel investors and the market for angel investments. Journal of Banking & Finance, 22(6), 785-792