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How Risky Is To Become An Angel Investor?

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A high amount of risk is involved in angel investing, but the returns are higher compared to other investment fields. By becoming an Angel investor, you can surely reap out huge profits, though the risk involved is greater.

Let’s go through some points that make the job of Angel investor highly risky.

Collapse Of Ventures

Many Angel investors are always running behind ventures that seem to become big fish in the market. If the venture gets success then the investor gains huge profit, but the main problem arises here is that most of such ventures fail to achieve success. So, when these businesses losses money, eventually the investors also lose money.

It’s Quite Hard To Sell Stakes In Such Businesses

It doesn’t matter how much stock you have in a company, you can’t trade it publicly in order to minimize the amount of loss. In publicly traded companies, you can sell the stock whenever you want, but the case is different with angel investing where such freedom is not available.

Risk Involved For Small Investors

The risky and costly nature of Angel investing stops investors from making investments, even when it offers many benefits. However, people with high net worth are more attracted to Angel investing. On the other hand, smaller investors incline more towards recognized groups or networks.

It May Take Time To Deliver Profits

As an investor, you may be aware of the fact that majority of investments take time to deliver profits. In other investment options you can hire managers who can manage the funds, but this option is not available with angel investing as it needs to be monitored constantly. Also, the investment will take a lot of time to deliver notable profits.

Chances Of Making Bad Investment Is A Lot Higher

Generally, angel investors get carried away while investing in businesses and fail to see the drawbacks of the business plan. As an angel investor, there’s a high chance that you might end up investing in a company that is bound to fail. However, this can be avoided to some extent by carefully checking the business plan you’re planning to invest in.

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5 COMMENTS

  1. My question is : can anyone become and angel investor?? Or are there any pre-requisites to become one? It is an obvious fact that to yeild profit one needs to invest and take risk but if you can do the math right and if you have an eye for the right proposal, than it really doesnt matter whats the extent of risk involved. Eventually the profit that you make will cover up for it all. But yes its essential to not get carried away. A calculative profit is always better than a hurried loss.

  2. An angel investor is an experienced and wealthy individual who invests his money in start-ups in exchange for ownership rights. Anybody like actors, sportsmen, businessmen, etc. can become an angel investor, the only pre-requisites are enough resources and government accreditation. Angel investors are more at risk than other players in the market, because they usually invest in start-ups and their only underlying asset is trust. Becoming an angel investor can be very difficult if you don’t have the right people around you; so, it is very important to build a strong network of experienced people who can guide you in selecting the best start-up to invest in.

  3. Now a days, Angel investing has become popular among youngsters as well. As of now it is a very risky task, in spite of investing too many investors are not benefited with huge profits and end up with a loss. This is for sure investors in order to earn, skip to see the drawbacks of the business in which they are investing and fails at certain times. Also Angel investing is not a spoon filled with sugar, which you can swallow quickly, its a game of lots and lots of patience as each and every business needs some time to grow

  4. This is the investor we all dream of… but this is the type of investor who also sees a lot more than we do as “ideas people”. If our ideas are invested in by an Angel Investor, we can almost guarantee our success, because these types of investors see what others can’t.
    On the other side of the coin, crowdfund investment can also signal success, because there is a guaranteed market for our ideas. You can’t beat having a market and having potential buyers being aware of your ideas before they are even funded!

  5. Angel investors are the most risk prone as compared to the share holders. But they are the ones who will gain the maximum in case the company registers profit. Money making business is itself a risky proposition. So to gain more one has to lose initially.

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