What is Angel Investment?
Entrepreneurships gain activity only by providing the necessary financing for the realization of the business idea. The investments necessary to provide this financing may occur at different stages of the venture. In this respect, “Angel Investing” is a type of investment that is made in the early stages of an enterprise and has a higher risk/reward ratio than other investment types. Initiatives that have great potential but cannot reach larger and right audiences need “Angel Investors” to be able to provide financing in order to do this.
Why Do Startups Need Angel Investors?
It is as obvious as possible that startups that need investment at an early stage need financing to grow themselves. In this respect, the institutions they can apply to in order to meet their financing needs are just as limited. Considering that banks will not easily support a startup that is still in its early stages, we can easily understand why these startups need “Angel Investors” in the early stages.
Why Angel Investors Invest in a Startup?
Even if a reasonable amount of money is invested in interest, since it is faced with the possibility of depreciation, it is to prevent the depreciation of their money and to make a profit, together with the value of the enterprise, by buying shares in return for a certain investment in order to prevent the depreciation of the money.
Although this type of investment is as risky as you might think when you read it, it can provide huge gains when done correctly. Many angel investors therefore invest in many ventures at the same time, aiming to gain more than the loss they have caused by the success of an investment. To roughly state the risk ratio of “Angel Investing”, we can easily say that 9 out of 10 investments will fail. This does not mean that 1 in 10 investments you make or will make will necessarily be successful, not 10, 100 investments that you make may fail.
Stages of Angel Investment
We mentioned that angel investors invest in startups at an early stage. In addition, early stage investments also have different stages within themselves. In this direction, Angel Investors can invest in a startup at the “Pre-seed” stage, that is, while they are still in the idea, and increase the risk/reward amount, or they can choose to invest in a startup that has reached the “seed” stage and is now on the market. Although the stages are not limited to this, they continue as Series A-B-C-… and as can be seen, the risk and gain decrease with each skipped stage. When and how much to invest is entirely up to the Angel Investor.
So, what stages do startups go through before they are selected? First of all, the team that came up with the idea of the initiative is evaluated in terms of “executing the idea” and then the “deviation potential” is examined and it is decided whether the initiative is suitable for evaluation. Following this, in the events held under the name of “Pitch Day”, startups introduce themselves and tell the entrepreneurs about the problem in the field they want to venture, the solution they offer and what kind of opportunity they have. On the other hand, startups that successfully complete this stage present their plans/programs at the “Deep Dive” stage and try to persuade investors with more detailed information, and if they successfully complete this stage, they go through an official inspection for security at the “Due Diligence” stage and receive investment after completing all stages.
What is Angel Investment Network?
Angel investment network is an environment that aims to bring both entrepreneurs and investors together and provides facilities such as mentors and workspace for the development of both. In this network, venture ideas are collected, analyzed and presented to investors, thus shortening the investment journey of startups and reducing the risk ratio of investors relatively.
These networks, which provide all these opportunities and aim to develop angel investing, make their profits through subscriptions, commissions or success bonuses to be received when they make a profit from ventures.