Business Angels are typically venture capitalists or wealthy individuals who invest in ideas and startup companies.
Business angels can help a business get started. At this stage there's usually just a lone entrepreneur who has an idea, possibly scribbled on a few pages in his notebook. There's no management team, no market analysis, no formal business plan; just a rough sketch of an idea. The entrepreneur usually starts developing a service or product prototype, but no marketing or product testing is done at this stage. Additionally, the entrepreneur will also start drafting a formal business plan and conduct market surveys, and may even assemble some key management team members.
Business angels normally nvest small but very significant amounts at this stage, ranging between $50,000 and $500,000, in return for equity. It is difficult for the entrepreneur to obtain this amount from traditional sources like banks as they require some form of security, and larger venture capital firms are not interested in investing such small amounts. Business angels typically have longer investment horizons, with a gestation period of anywhere between 8 to 10 years. They are less concerned with the initial valuation of the company, and more concerned with the business idea, its viability and future prospects. The risk involved is very high, however it is offset by the expectation of growing the company into a large and successful enterprise.
- The biggest challenge is to shortlist and identify promising startups with novel and attractive business ideas
- Analyzing the business model with respect to viability, growth prospects and the risks involved
- The holding period is sometimes very long due to the illiquid nature of investment
- Access to latest research material like white papers, news articles, trend reports that provide insights into novel and upcoming business ideas
- Proprietary database that identifies potential and qualified opportunities matching your investment criteria
- In-depth research of the business idea to analyze and quantify the risk and returns involved with the investment
- Proven expertise on investment and scenario analysis to minimize risk exposure
Detailed exit strategy based on multiple holding periods and 'best-case scenarios'
- Professional advice coupled with high quality research to help you maximize returns from your investments
- Professional risk-return analysis and other financial analysis like discounted cash flow analysis to analyze investment decision
- Help identify exit routes which are in sync with the changing business conditions and changing priorities of the investors
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