Financing Start-ups: Through crowdfunding and Angel Investors

Traditional means of funding such as bank and co-operative loans are generally avoided by entrepreneurs as they have their own limitations. Crowdfunding and Angel Investors though not a naive way of finance, still are considered as a suitable option to traditional funding. Interestingly, mix of crowdfunding with Angel investors is considered to be a new way of funding.

The Know How’s of Crowdfunding

Meaning of the word ‘crowdfunding’ is as lucid as it can be i.e., raising funds from the crowd. It takes a lot of money to kick start a start-up, but when the expense is shared amongst the masses, financial burden is distributed hence lessened. These fund investors become a part of the budding company and are paid off in either the rewards way or equity way. The only concern of funding investor is eased by crowdfunding platforms these days.

The Know How’s of Angel Investors

Angel investors are financially abundant individuals who provide the required capital for a start-up to function. These funds provided by Angel investor are transacted with shares of the company or convertible debts. People deemed as Angel investors are often retired people from Top level management or entrepreneurs. They are basically in search of gains beyond green paper. The prime motive of Angel investor include being aware of latest happenings in the field of businesses and guiding others through their experience.Angel Investors fill the gap between seed funding (from relatives) and venture capital firm funding. Seed funding are not capable of rising money more than a few hundred thousand dollars and venture capital often believe in a greater sum of investment. Hence, Angel investors perfectly fit in to the picture in between the two.

The mix of Angel Investors with Crowdfunding

The idea of funding start-ups has gained sufficient momentum in the recent years; hence it has led to emergence of a number of crowdfunding platforms. Some of the eminent crowdfunding platforms house both crowd funders and Angel Investors. With this advancement there has been hardly any difference in between the two on these crowdfunding sites. A fund seeker can showcase his projects over a crowdfunding platform, the investor registered with these platforms could see various options of new start-up from the categories in which they want to invest and choose one from the list.

Apart from the pros there are a few risks involved with the investment from Angel investor. The most prominent amongst them is the demand of high investment returns by the Angel investor. Hence, less confident entrepreneurs find it difficult to get their project financed from Angel investors.

However, the best part is that, finances could be gained from Angel investor at a very early stage of ventures, which is something banks can’t provide.

Financing Start-ups: Through crowdfunding and Angel Investors