Angel Investing as a Residual Income Source
The most common limiting factor for people achieving their entrepreneurship dream is finance capital. In fact, most people confess that if they had some source of funding they would start up a business. What you may not have known up to now is that you can actually start up a business without any start-up capital through angel investing.
Angel investors are people from all backgrounds who are passionate about helping the next generation entrepreneurs start off. If you’re familiar with TV entrepreneurship shows like “Shark Tank” or “Dragons Den” then you already have an understanding of how angel investing works.
Angel investors come from a diverse background including lawyers, designers, tech specialists, and even seasoned entrepreneurs. The only thing they want from you is a small cut in your business but are willing to put up to 100% of the capital investment.
How does Angel Investment Work?
Angel investors can be categorised into four main groups; friends and family, individual angel investors, angel investor networks and fund raising investors. You can choose to be an angel investor, investing your capital in a business idea to generate a residual income, or as the recipient of angel investment to invest into your own passive residual income idea.
Friends and Family as Angel Investors
Getting business capital to start up a business as a residual income source can sometimes lead you to turn to friends and family. The main advantage of using this route is that people close to you will always know your talents and passion and may be able to advice you appropriately. They will also give you their honest opinion on businesses that they consider risky investments and may help you come up with alternatives. The disadvantage of having friends and family as your angel investors however is that mixing personal relationships and business may be challenging. And you may be forced to make some decisions simply from the pressure of having loved ones investing in your business.
Angel Investor Networks
Are professional networks that connect angel investors to potential entrepreneurs. Most of the networks are run online and this makes it possible for investors who want to keep their anonymity to be able to participate. Angel investor networks will normally do screening for potential investors and entrepreneurs. The investors, anonymous or not, have a team of managers that set investment targets and follow up on profitable investment opportunities. Angel investor networks also have the advantage of lettings angels’ pool up capital for certain ventures. So sometimes you may be lucky if an investment idea you were thinking of as a residual income source gets the attention of a couple of investors and they all decide to pour in money for a share in your business. Getting an angel investor from an angel investment network will give you the advantage of profiling potential investors so that you can pitch your idea and don’t have to call individual investors but only those that have shown interest. Example of large angel investor networks in include the Australian Investment Network and Cornerstone Angels.
Individual Angel Investors
This is perhaps the hardest means of finding an angel investor. There are two major challenges using this route to find investment for a residual income source business. The first challenge is that most individual angel investors are away from the public limelight and even when you get to know them, for the ones with offices, they will only be investing in business entrepreneurs that require millions. The second reason is that these investors don’t know you so they may be apprehensive in supporting you.
A good tip for finding a potential individual investor however is to get to know them through network connections. If you know someone who is friends or relatives with a potential angel investor in your industry and business model, then you could approach them with your idea and ask them to do the introduction for you.
Microfinance Investment as an alternative
Non-profit microfinance sites like Kiva and Thrive also give you an opportunity to start up a residual income source business if you are from a disadvantaged background. These sites have support from sponsors and grants as well as donations which enable them to be able to financially support entrepreneurs with limited access to finance. Another advantage of getting funding from these micro-finance groups is that they will offer free financial education and also motivate you to succeed in order for you to give back to the community.
Other Passive Income Ideas
If you are interested in reading about other passive income ideas and passive income investment ideas, have a look at this site www.passiveresidualincomefreedom.com