Angel Investor Participation
One of the most frequent questions entrepreneurs have concerning angel investors concerns the amount of control the investor will want in the business. This can be a matter of contention at times only because entrepreneurs tend to be free spirits with a vision and don’t want anyone interfering with that vision. However, practical considerations dictate that a business owner or business management needing investors is going to have to play by investors’ rules.
The risk of company failure is one of the primary considerations angel investors, equity partner, venture capitalists and others investors consider when deciding how much control to exert over the business needing the money. The higher the risk, the greater the amount of control angel investors will want to have over operations. That only makes sense because it’s their money at risk.
Passive or Active Lenders
Angel investors have several options in terms of the level of control required before lending money. Passive investors will simply lend the money and not ask for any participation in the company on any level. Angel investors also have the option of remaining passive but offering mentoring services upon request. Many angel investors have significant management experience and can provide invaluable assistance is asked.
There are also active investors who insist on having some say in the business in exchange for lending money. Once again, the investors’ role can vary. Some will sit on the board of directors and simply act as a voting member. Another option is for an investor to sit on the board as the head of the board of directors and thus take full responsibility for major business decisions.
In some cases, the angel investors or other types of investors like equity partners or venture capitalists may insist on temporarily assuming a full executive level position. Even some lenders offering business loans may require a representative be fully involved in the company as a manager or executive. This is to insure that the business has access to the expertise needed to succeed and to protect the investment.
Keeping the Business Alive and Well
Sometimes a passive investor will choose to become an active investor if it appears the business is floundering. The angel investors provide funding in many cases where traditional funding would never be approved. That doesn’t mean these investors will just accept a company that appears to be heading towards failure. The angel investors will have to convince the majority stockholders and the business executives to allow them to function on a basis that extends beyond the negotiated agreement.
It really comes down to risk. All investors accept a certain amount of risk. The investors will require regular management and financial reports that are used to measure progress. Whether the investor is passive or active, the ultimate goal is to realize expected returns. When negotiating funding terms, keep in mind that even entrepreneurs should take advantage of expertise and experience lenders may have to offer.
More detailed information and useful advice can be found at
- Venture Capital, Business Plans, Angel Investors & Investment, Business Funding | Funded.com
Funded.com connects angel investors, startup funding and business funding with entrepreneurs. Funded.com affordably assists business plan writers create investor ready business plans.
This hub brought to you....
by Julie-Ann Amos, professional writer, and owner of international writing agency www.ExquisiteWriting.com
Why not create your own HubPages? It's fun and you can make revenue from Adsense and other revenue streams on your pages. JOIN HUBPAGES NOW
This work is licenced under the Creative Commons Attribution-Non-Commercial-No Derivative Works 3.0 Unported License. To view a copy of this licence, visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to CreativeCommons, 171 Second Street, Suite 300, San Francisco, California94105, USA.
Other relevant HubPages
- Angel Investors; How To find them
Your best bet for initial business investments is angel investors; these can be your friends and family, they can be prospective suppliers or funny enough your competition. When I say competition, I mean,...
- Angel Investors Growing in Importance
In todays economic landscape, angel investors are growing in importance because they fill a gap left by traditional lending markets as credit remains tight. Banks and other institutional lenders dont...
- Approaching Angel Investors With a Realistic Plan
When deciding to approach angel investors, equity partners or venture capitalists, its important to have well thought out business plans that realistically present your case for funding and the probability of achieving profitability. Finding...
- Lets Pretend.Youre the Angel Investor
When you begin looking for startup funding from angel investors, the best approach you can take is to pretend that you are the investor. Investors want to put their money into new ideas and give entrepreneurs an opportunity to succeed, but they...
More by this Author
For some people, one of the most horrible experiences that they can have is to find a garment that they absolutely adore only to see those three terrifying words sitting there on the tag... "Dry Clean Only."...
Popular Pubic Hair Styles as a hub went only so far... it focussed on the Ladygardeners among us. BUT... "A man's gotta do what a man's gotta do," they say – and that used to be a simple motto to...
Jamie Oliver – also known as the ‘Naked Chef’, Jamie Oliver is a very popular television celebrity known for cooking and absolutely nothing with being nude. He didn’t even agree with the title of...