Finding capital for a start-up business can be a challenge, which is why some Ohio entrepreneurs accept the help of an angel investor. The capital angel investors provide can help business owners purchase the needed inventory and assets to get their business going, but in some cases an angel investor might burden the business owner with demands that the owner might not have bargained for. So before you take on an angel investor, it is crucial to consider what an angel investor might ask of you.
According to Chron.com, what an angel investor will ask for in return for investing in your business is going to vary. Some angels are willing to make a major leap of faith, providing funding without asking for any collateral. Since some business owners may not have any assets to start with, this can be a welcome development. However, there are some angels that insist on securing their investment with collateral, such as your company building or your inventory.
Be prepared for an angel investor to want a piece of your company’s ownership. Some angels end up with a percentage of the company. If you cannot launch your company without the angel’s investment, you might end up giving up a large portion of your company’s ownership, perhaps even more than a majority share. If your company offers stocks, your angel may opt to purchase a certain percentage.
You should also consider how much control you want to retain over your business. Some angels will be fine with you exercising full control over the company while they hold most of the company’s profits or non-voting stock. Other angels will scrutinize the company’s use of their investment more closely and insist on a strong measure of control over the company.
If you put a premium on controlling your business, you should be careful which angel investor you choose to partner with. Some angels will be glad to take greater profits in exchange for you retaining full command of the company. Also consider offering an exit strategy that allows your angel to depart the business, perhaps by cashing out. Since interactions with an angel investor can take many forms, only read this article for informative purposes and not for legal counsel.