The pros and cons of an angel investor

Post date: Mar 27, 2020 7:55:58 PM

A startup entrepreneur has many options to choose from when it comes to financing their business. Besides their savings, they can turn to banks for a business loan or approach investors who see the potential of their ideas. And among the many types of investors, entrepreneurs also work with angel investors. Scott Tominaga notes that angel investors are high-value individuals who support startups to stimulate economic growth. Their money comes from their own pockets as opposed to a venture capitalist’s funding that comes from multiple investors. While the name does sound benevolent, there are still some negative aspects to an angel investor, which counterbalances the positive ones. Here are some pros and cons of angel investors.

Pros Entrepreneurs everywhere would be thrilled to receive funding for their business as opposed to a loan that they would have to pay off plus interest. In the event of failure, angel investors don’t expect entrepreneurs to pay them back. It’s just part of the deal. But in the event of success, they do get a stake in terms of ownership of the business. Thus, partnering with an angel investor often boosts the success of a business. Cons

Since angel investors are mostly individuals, they would often come up with ideas that are hard to turn down. Besides some form of interference in running the business, angel investors are still investors who will want partial control over the company. But Scott Tominaga believes that this may very well be something positive if your angel investor knows what he or she is doing.

Scott Tominaga is the Chief Operating Officer of PartnersAdmin LLC, whose offices are based in Los Angeles and San Diego, California. PartnersAdmin LLC was established in July 2008 with the intent to provide a quality, outsourced solution to meet the dynamic back-office needs of the alternative fund industry in response to the industry’s increasing focus on best practices to reduce systemic risk and promote investor protection. For similar reads, visit this blog.