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Angel investors - wise to invest in small business


A big Tightwad welcome to Sara MacKey, who writes about angel investing.

With today's sluggish economy showing little sign of recovery, investors have to be more careful than ever when deciding which venture to seed and for how long. Small businesses are one of the wisest ventures an angel investor can choose to fund.
Rate of return One of the key aspects angel investors look at when choosing to invest is the rate of return and return on investment. A recent study looked at eighty-six angel investment groups and over five hundred individual angel investors and found that when investing in small businesses they had an average rate of return of 2.6 times in just 3.5 years. Small businesses also tend to need less seed money, but have a higher growth potential and better return rate for the money invested than other types of investment opportunities.
Start small to expand faster For angel investors, it is wise to start smaller and invest in small businesses that show a high level of quality management, growth potential and that have products able to fill a need in the market. Investing in small businesses also allows you to assume partial ownership, giving you more control over how your funding is used and to bring in your business connections to ensure a greater chance of success. Small businesses that actively seek out angel investors are usually worth investing in and tend to be among the fastest growing companies. By starting with smaller businesses, you risk less, but often times see a great return for your investment. Once you have a few successes, you can either invest in a greater amount of companies or invest larger sums in fewer businesses.
Greater selection of choices Angel investors would be wise to look towards small businesses as a main source of investing because there are countless small businesses starting everyday that need alternative business financing. Many small businesses that could be sure-fire successes may not be able to meet the banks stringent requirements for a loan. Larger businesses are often scooped up immediately by venture capitalists and are too pricey for the average angel investor's financing abilities. Additionally, venture capitalists will not look at small businesses that are not already showing signs of success and tend to stick to high dollar investments. That leaves less competition for you and a wide open field to choose from when looking to invest. Small businesses not only see a good rate of return for your investment, but they also boost the local economy which can lead to more chances at solid investments.
Investing in small businesses can offer you a great return on your investment, allow you to assume partial ownership to further ensure success and offer you more options for investing.

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