One of your first questions about angel investing may be, “If this angel investing thing is so great, why is it only now becoming so popular?”
When it comes to valuing a startup, some people say it is more art than science or that you are really taking a shot in the dark. Many angels will start with where the company is today and try to determine a valuation based on the current condition of the startup. They may start with a low valuation and add to it depending on where the company is in its process – i.e. Do they have early revenue? Do they have stable customers? Are they profitable? etc.
In our previous post, we discussed the strategies you can employ to increase your chances of being successful at investing in startup businesses by mitigating small business risk. In this post, we will address the other major risk inherent in Angel investing – liquidity risk – and ways you can mitigate liquidity risk, as well.
In our last post, we discussed the details of the two main risks that Angel investors will face when investing in startups - small businesses risk and liquidity risk. This post presents a few strategies that will help investors mitigate these risks and increase your chances of making successful Angel investments.