You may have seen comedy shows in which a character repeatedly goes to friends and family, asking them to invest in his or her next great idea. While the joke is that the character’s schemes are never going to be successful, the thought of going to friends and family for financial help with getting your business started may not seem funny to you.
If you are ready to start your own New Jersey business but lack the capital to make it happen, you may wonder where you can go for help. Perhaps you are not able to acquire the loan amount you need, and your loved ones are not able or willing to sink what they have into your business. You may want to explore the option of seeking an angel investor. These wealthy individuals often look for opportunities to invest in new businesses they feel have potential for success.
Is this the right plan for you?
Angel investors use their own money to support entrepreneurs like you. They offer funds so you can start your business or expand an existing enterprise. In exchange, you provide a return on their investment, usually at least 25%, as well as other considerations. However, this kind of financial support is not for everyone. You should be aware of the following details before you approach someone for an investment:
- It is not always easy to locate someone who is willing to be an angel investor.
- Angel investors often want a say in how you will run your business.
- Your investor or investors may claim a share of any profits you make when you sell the business.
- You may find that several investors are willing to work together as a syndicate to finance your business.
- Crowdfunding, which is a way to reach groups of investors online, is becoming a popular form of angel investing.
- Angel investors often have a realistic perception of how businesses work, so they understand the risk.
- You will have many legal elements to understand and discuss before you make any decisions about accepting an angel investor.
In fact, legal issues may arise at any time during your relationship with your investor. Therefore, it is wise to seek legal counsel from an attorney who can support you for the life of your business. This includes negotiating with potential contributors and protecting your rights as you work with your new investors.