In many of our previous discussions we have focuses heavily on how to attract angel investor business to a company for a small business investment. Here, we are going to specifically focus on what you can do to become a private funding source for other individuals. Foremost, one of the things that private funding sources have trouble with is finding economically viable projects to invest in as it relates to small businesses. As such, the first thing you may want to do is join a syndicated group of investors that review business proposals on an ongoing basis investment companies
Typically, the requirements in order to join one of these investor business groups is that you must be considered to be accredited under the rules and regulations set forth by the Securities and Exchange Commission. Generally, you will need to have a net worth of at least $1,000,000 excluding the equity of your primary residence. As an alternative to the net worth requirement, you can have an income of $200,000 per year or more with the reasonable expectation that you will continue to earn a similar income during the next two to three years.
Becoming an Angel Investor
Once you have passed the accredited investor test then it is time to begin to review investor business prospectuses that will be sent to you by individuals and businesses that are seeking capital. There are a number of ways to go about this matter. First, you can enroll yourself on a number of different websites that will directly send prospective businesses to you.
Before you enroll in an angel investor website, you should make sure that they are a legitimate business and that they are not going to distribute your information directly to any party that is seeking outside funding. You can find these websites by doing a simple search on the internet relating to small business investment and related topics.
Additionally, there are a number of local chambers of commerce and business associations that you can join. Here, you will be able to network with a number of other angel investors as well as local businesses that are in continued need of capital for development or expansion purposes.
We strongly recommend, however, that you keep your status as a private funding source somewhat guarded when working directly with these groups as you will find that people will constantly approach you with business ideas and requests for capital. However, if you do not mind this then you may want to hold yourself out as a professional investor to the general public. Unlike businesses that are seeking capital, there are no laws or regulations that prevent individuals with money from advertising their services to the general public.
As with all investments, you should have your business advisers, lawyers, and certified public accountants work closely with you when you are making potential investments into small businesses. These firms and individuals will help you immensely when it comes time to negotiate an equity interest in a business as well as having all of the proper contractual documentation in place.