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Should you contact angel investors to fund your New York startup?

On Behalf of | Aug 16, 2023 | Business Formation |

If you’re looking to fund a startup business in New York, an angel investor can help. An angel investor is a person who funds your business in exchange for a return on their investment.

How to attract an angel investor

Business formation and planning should occur before reaching out to an angel investor. A solid business plan and specific information about your business is necessary. If you approach an angel investor with little to no idea about your business, the investor will likely decline your funding request.

According to Inc. magazine, an angel investor needs an incentive to fund your business. You must work to convince the investor that your business is worth funding.

Some angel investors prefer to fund businesses that are already profitable. However, some angel investors will fund a business that has yet to profit.

Angel investor advantages

One advantage of an angel investor is you don’t have to repay the funds. Getting funds from an angel investor isn’t the same as getting a loan. An angel investor expects a return on their investment when your company goes public or you sell it.

Another possible advantage is an angel investor might offer additional help. When your business is successful, the angel investor will eventually see a return on their investment. Considering this, the angel investor might offer valuable business advice or help with management and other business operations.

Angel investor disadvantages

An angel investor will want anywhere from 10 percent to 50 percent ownership of your business. Handing over that much control might make you uncomfortable. The angel investor could push you out if you give them more than 50 percent ownership.

If you decide an angel investor can help, your next step is finding an investor. You might want to search locally by contacting business groups or schools in your area. There are also online resources such as the Angel Capital Association, the world’s largest organization of accredited investors.

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