To define angel investing — it is the act in which an affluent individual provides capital for a start-up, usually in exchange for an ownership equity or some other form of a convertible bond. However, what would drive an ‘affluent individual,’ who is presumably well-settled with his finances, to provide support and monetary help to the risky start-ups as a form of investments?
Angel Investing, seemingly an uncertain idea, has more advantages for the people who practice it than meets the eye. For someone who has pretty much settled their own business, it gives them an activity to do and mettle to invest in, apart from their money. Take Ratan Tata, who has an entire empire, and branching out with some capital to smaller business and start-ups is something to keep him busy.
Angel investing also helps in keeping an out-of-touch investor up-to-date with the current trends. The latest start-ups that crop up are the ones cashing in on the latest trends. IoT, Artificial Intelligence, Blockchain, or even booking a stand-by for the ATM line are examples of the current customer needs to be used to start businesses, and involving themselves with these, angel investors make sure they do not lose out on the latest shift in the business pressure points.
It also ensures recognition, for someone who has done his share of work, investing in a new and coming business means a chance of creating impact and getting recognized when they might be at a point where their work cannot expand anymore to do that.
Angel investing is also a way to expand the existing business of the investor, case in point Vijay Shekhar Sharma, founder of Paytm and one of India’s top angel investors, who has numerous investments in various companies and can expand his existing entity to a wider reach and business.
Angel investing can do more good than would meet the eye, and these aforementioned reasons why a person would indulge in it would make it more profitable an activity than perceived.
(Written by Sanjay Enishetty, Managing Partner, 50K Ventures. Originally published on his Medium account.)