If you’re an experienced angel investor looking for new opportunities, you may find what you’re looking for by investing with a group instead of individually or with a few friends. According to an article published on Phys.org, the benefits of working as a group include better deal flow, diversified portfolios, due diligence and evaluation, along with social interaction with other investors. If you’re just getting started with angel investing, participating in a group gives you the ability to learn from more experienced investors, helping you limit the risk of going in blind or unprepared.
The Basics of Group Angel Investing
An angel investor is an individual who provides capital to start-up businesses in exchange for ownership equity or convertible debt. In an angel group, you’re still able to provide capital to start-up businesses, but you do so with other investors as part of a larger group. This provides you with access to better research, evaluation, and due diligence, enabling you to make more informed decisions about where to invest your money without relying solely on online reputation and individual research.
Investing as part of an angel group promotes individual investors to pool their money together, allowing for larger investments over a longer period of time. For businesses, this means access to deeper pockets without the need to include venture capitalists for initial or follow-on funding. Businesses also benefit from a more streamlined and professional funding process, as angel groups have a “gatekeeper” or group administrator who handles the administrative process. Having a group administrator is another benefit for inexperienced angel investors, as well.
Looking for Positive Returns
In an article published on Forbes, research conducted by the Kauffman Foundation found that the average return for angel investors is 2.5 times the initial investment. Unfortunately, the odds of a positive return at all is less than 50 percent. While this type of investment risk is on par with that of venture capitalists, there are better ways to increase your odds.
A diversified portfolio is a great start, a benefit that angel groups can provide. In addition, joining an angel group can give you access to higher quality deals that aren’t available as an individual investor. With over 330 active angel groups in the United States and Canada, finding one to join may not be as hard as you think.
Joining an Angel Group
With better research, evaluation and due diligence, access to higher-quality investment opportunities, a group administrator to take care of funding and administrative work, you’re probably looking for the sign-up sheet. Keep in mind there are usually requirements for joining angel groups, and yearly investment requirements aren’t uncommon.
Investing as an individual usually allows you to choose the amount of time you want to commit to your investment business. This may not be the case when participating in an angel group. In addition to attending a mandatory screening process, many groups have events you must attend throughout the year.
Before you investment money in a new start-up business, take a look at angel groups in your area that may have access to better opportunities. With more diversified portfolios, group administrators, and the expertise of other investors, you may end up with a better return on your investment.
This article was written by Brian Flax, a freelance writer based out of the Washington, D.C., area. He holds a master’s degree in education technology and a bachelor’s degree in entertainment business. Brian is experienced in a variety of topics, including technology, finance, business management, and what to look for when you’re looking for an article writer.