What Is Business Angel And How Do They Help Companies Raise Money, angel, Business angels are investors who do not deal with the share market, but rather invest in companies that will be the next big-name companies to hit the market.
These angels give their money to a company so that they can make it to the market and give it publicity, as well as build the investor's confidence as to whether the company is going to be a success.
They work alongside investors but have their own specialised knowledge that the investor does not have. Business angels will have deep knowledge of the company they're investing in, as well as having a good ability to predict if the company is going to be successful.
What Is Business Angel
Business angels will be privy to information that the rest of us can't hope to have.
So it's vital that they do not choose a company they don't understand.
To be successful a successful business angel investor or long term investor needs to be patient, know the company and be able to watch the movement of the stock.
Well Informed On Company
They need to be well informed on company direction and what is happening within the company. The more you know, the more successful you will be as a business angel investor.
Business angel investors don't do this on their own, they work alongside investors with similar interests in the same company, which in turn creates the angel pool.
So what sort of company gets a business angel investment?
Well, there are lots of things that can result in angel investment, but mostly it's a great company that is on the rise with a bright future. Some examples of great companies that have angels are Nestle, BHP Billiton, Macquarie Group, Rio Tinto, and even Facebook (whose angel investors were Goldman Sachs).
So what are the risks of angel investing?
Well to be honest, from my experience it's a bit of a gamble, but if you choose a company that has a good chance of succeeding you stand the chance of making a nice profit. Not a guaranteed profit, but a chance of turning a nice profit.
Angel investing really is a bit of a gamble. It's risky and it's not for the faint-hearted, but for those people who are willing to take a chance and like the chances of making money, angel investing can be a great way to make a profit.
Company That Is Rising
If you're the one who feels the company is on the decline, you stand a good chance of losing everything you've invested. But if you spot a company that is rising, and you see it has a good chance of succeeding, angel investing can be a good way to make some money.
So why do people do angel investing?
There are many reasons why people invest their money. Some invest for family recreation, to help pay for kids education or simply to see their money work. Others invest for the opportunity to earn more money than they originally planned.
What is business angel, Business angel investors have a lot of reasons why they invest.
For instance, I read a story a while back about a man who invested in the best companies in the best sectors and built a nest egg of $8 million.
Buy And Hold Strategy
Then he sold everything, took the money, and went on a luxury vacation. He came back to find that his stock had dropped to $1 a share. He had lost $8 million. In fact, many people invest using the ‘buy and hold” strategy. And it works, for a while. But eventually, stocks tend to head lower.
I have read many stories like this, where the angels sit there scratching their heads, wondering why their stock dropped so dramatically. And when we start seeing these kinds of stories over and over again, we can begin to understand what's happening.
The reason why stocks tend to drop is that those angel investors are buying and selling their shares too late. The angels are sitting on their cash, and the stock is rising, and they start to want to get in. But they don't have the money, yet.
So they wait for their stock to settle down a bit more, and then they jump on the bandwagon. This is a very bad strategy. What we are trying to achieve with our portfolio is to catch the beginning of a trend. We don't want to buy at the top. We want to catch the trend. If we catch the trend early, we have to sell later.
Your Investment Strategy
In fact, many of the best investors I know don't buy their stock until it has already started to rise. They watch for signs that it's going up, and then they make a decision.
Some of their best decisions have been to buy after a stock has already made a big move. But for the most part, we like to buy a stock when it is moving up, and sell when it's moving down.
Financial Spreadsheet
Lastly, a quality financial spreadsheet will give you valuable research regarding the stock. This research will be based upon fundamental analysis and technical analysis.
Technical analysis is based upon which stocks are likely to rise or fall based upon fundamentals such as Price-Earnings Ratio and moving averages. That is what is business angel investing is all about, Doing research.
P/E Ratio
A quality financial spreadsheet will identify whether the stock is undervalued or overvalued based upon P/E ratio and if the P/E ratio is overvalued based upon an adjusted P/E ratio. Thanks for reading my post on what is business angel.
