Angel investors provide support as well as cash

Entrepreneurs in Pennsylvania and around the country have traditionally approached venture capitalists when conventional lenders are reluctant to fund their new commercial ventures, but a new way to finance business startups has emerged in recent years. Angel investors are often friends, family members or acquaintances who provide advice and moral support as well as needed cash. Angel investors are generally more flexible when repayment terms are negotiated and might not pursue unpaid debts when new businesses fail to perform as expected.

Unlike venture capitalists, angel investors tend to view their loans as investments in people rather than business ideas. This kind of transaction is often seen as an act of goodwill that carries the possibility of a lucrative reward should the business succeed. Like venture capitalists, angel investors are generally repaid with an equity position in the commercial ventures they back rather than monthly payments.

When family members and friends lack the funds or business experience to act as angel investors, entrepreneurs can turn to organizations such as the Angel Capital Association for help. The group, which was founded in 2004, is an alliance of more than 1,300 angel investors and 260 angel investment groups in the United States and Canada. There are also a number of online platforms that are designed to help entrepreneurs connect with angel investors.

Attorneys with business development experience may encourage entrepreneurs to think carefully before asking their families and friends to support their nascent business ventures. When their clients make such approaches, attorneys may urge them to be completely forthcoming and candid about their business idea and its chances for success. Attorneys may remind business owners that giving angel investors unrealistic expectations or borrowing more from them than they can afford to lose could jeopardize relationships that have endured for years.

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