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Angel Investors Growing in Importance

Updated on August 25, 2015

In today’s 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 don’t like to invest in startup companies meaning entrepreneurs have to locate their own startup funding. There are plenty of great business ideas that end up languishing due to lack of funding when they could be locating funding through angel investors.

Startups need money and angel investors want to make business loans. It’s a win-win situation.

New Companies Welcomed!

Finding business funding for business startups can be challenging, but it’s something every current business has had to face. Lack of funding has brought many new ideas and concepts to an abrupt halt. The recession has made the process of finding money even more difficult, and that is precisely why investors seeking better returns have become instrumental in helping small businesses startup and even expand.

Angel investors are looking for better returns on their investments while businesses need money to bring new products and services to the marketplace. It’s a perfect match because both sides are able to meet their goals. Startup businesses are attractive to angel investors whereas those same businesses would not be able to obtain venture capital and equity partners are looking for established operations.

Angel investors invested $8.5 billion in quarters 1 and 2 of 2010. That number was reported by the University of New Hampshire Center for Venture Research. The Centre tracks the financial activity of angel investors and venture capital. Approximately 25,200 businesses obtained angel money which means angel investors played a significant role in the formation of small businesses. Angel investors, venture capital and equity partners are just some of the private investments that help entrepreneurs looking for business funding.

Every Industry

It’s obvious that angels are committed to helping new businesses. They invest billions of dollars every year and in every industry.

  • Medical
  • Alternative Energy
  • “Green” Industry
  • Biotechnology Labs
  • Computer Hardware
  • Computer Software
  • Industry

Angel investors today are individuals or groups of people who have decided to combine resources. This enables them to invest larger amounts of money or make larger business loans. At one time, these investors operated exclusively on an informal basis but not anymore. Individual angels and angel groups are looking for businesses with excellent business plans and innovative ideas for products and services.

The number of angel investors has grown to the point where they have created their own trade association. The Angel Capital Association is a resource center for angels where they can network and share information.

A frequently asked question concerns the difference between venture capitalists and angel investors. The term angel investors usually refers to investors who concentrate on startup or early stage businesses. Their investment amounts normally are lower than amounts funded as venture capital. Angels know that new businesses have a difficult time getting approved for traditional bank loans and concentrate on these enterprises.

Venture capital usually offers funding to existing businesses. Larger amounts are involved and investments can run into the millions.

On the other hand, there are really no hard and fast rules which is why you should pursue multiple funding sources.

Goals Meeting in the Middle

Startup funding is available. You just need to look in the right place, and that place is where the angel investors are found.

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    • Hello, hello, profile image

      Hello, hello, 6 years ago from London, UK

      Thank you for your informative hub. I have never heard of them.