Steph Korey has extensive experience in supply chain management and co-founded Away – a lifestyle brand. She’s also invested in multiple businesses as an angel investor and is thus well-qualified to explain what exactly angel investors are. According to Steph Korey, angel investors are so much more than purveyors of capital.
What is an Angel Investor?
An angel investor is an individual that provides capital to early-stage businesses. This type of investor can be defined both in terms of the capital they offer and the types of businesses that they look for.
The capital that angel investors offer is sometimes contrasted with funds that traditional lenders provide. Whereas banks and government programs usually have pre-structured requirements and offerings, there are no stringent requirements for angel investments. These investments can be structured however an investor and business owner agree.
According to expert Steph Korey, The lack of a predefined structure allows angels to invest in early-stage businesses that may not qualify for more traditional loans or grants.
The ideal business opportunity that angel investors look for is the proverbial “unicorn.” They want businesses that are disruptive and that have massive potential growth.
Investors recognize that many early-stage businesses have significant associated risks, and not all will pan out. Investors, therefore, aim to make multiples on those that do succeed.
Who Are Angel Investors?
Angel investors have accredited investors at the very least. Accredited investors must have either a net worth of at least $1 million, or an annual income of at least $200,000.
Most angel investors have funds well beyond $1 million, and they often have been successful in previous business ventures.
How Much Are Angel Investments?
Because they don’t have predefined terms, angel investments can range dramatically. Some investments in small, local businesses can be just a few thousand dollars. Investments in unicorn businesses can tens of thousands, hundreds of thousands, or (occasionally) millions of dollars.
Many factors can influence how much a single angel investor provides. A few are the:
- The current valuation of the business
- The projected growth of the business
- Capital needed to execute a growth strategy
- Number of other investors
- Angel investor’s available capital
How Are Angel Investments Structured?
Angel investments typically come in lump-sum disbursements, for investors typically seek out businesses that can quickly put capital to use. Investments might sometimes be distributed in phases, with additional amounts released as a business reaches benchmarks. Occasionally, a separate salary is also included to provide stability for the business owner.
The returns that investors receive can be structured in many different forms. Depending on a business’s growth plan, the investment required, and the investor’s personal preference, the investor might receive:
- Some ownership in the business
- Royalties on the business’s sales
- Regular disbursements from profits
- Interest payments on a loan
- Future ownership potential via a convertible loan
Stephe Korey Invests as an Angel Investor
Steph Korey has made a number of successful angel investments in early-stage businesses. She prefers to invest in early-stage businesses that are established by underrepresented entrepreneurs.
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