There are many ways to earn money but one of them is Angel Investment. Angel investment is the best way to earn passive income. On this a person invests in any new startup and in return takes some share in it. But this investment happens when that startup is a new launch. There is no chance for that startup to fail and be successful. Then a person invests in it by becoming an angel. He invests just by looking at that startup team and seeing their plans. When that startup grows, then the money of that angel investor also grows. This is called angel investment.


But the money of the angel investor increases with the growth of the startup, but the question is how does he earn money. This is not the only way to earn money. An angel investor makes money in many different ways.


Ways Angel Investors Make Money


1. Equity Ownership

Whenever an angel investor invests in a startup, he gets some percent equity in that startup in return for that investment. As the startup grows, so does the investor's money.


If Angel wants to earn money, he can also earn profit by selling that equity to another investor.


2. Capital Gains

If a startup has a lot of assets, then if the startup members sell that, then they and their investors can get a good income.


It doesn't happen mostly. This happens when the company takes a big loss. Or if the company is closed, then all the assets of the company are sold and distributed to all the investors.


3. Dividends

A dividend is one of the startup's earnings that is given to its investors. Whenever the startup makes a significant profit and all the startup members agree, then the company pays dividends to its investors. It is received by investors either through cash or through equity in that startup.


Its purpose is that whoever invests in the startup should get some reward in return for their investment. This also earns the investors and they also retain their investment.


4. Board Membership

If an investor becomes a board member, then from there he can earn through salary. But it is not that simple. To become a board member, the investor must have some future plans for the startup. Should have the ability to take the right decision.


A board member has many responsibilities. If an investor is capable of that then only he is included in the board members.


5. Acquisitions

Acquisition means that when two companies become one, it is called Acquisition. This happens because through one company, the other company also gets profit. Because the big company acquires the small company. Due to this, the small company gets a good customer base of the big company.


Investors also get a lot of profit in this. Because when the customer base of the company increases, then the profit of the company also increases. Along with this, the money of the investor also increases.


6. Initial Public Offering (IPO)

Through IPO, a startup raises money from the public for its startup. ipo is one way for this. This happens only with those startups which are more famous and their growth is significant. Because when the public gives money, it gives by trusting the growth of the startup and its board members.


Once the IPO of a startup is successfully launched, then the startup gets a lot of benefit. Due to this, the money of the investors increases in good standing.



Why Angel Investors Invest In Loss Making Startups


You must have heard somewhere through the news that many angel investors are investing in loss making startups. Often this question must have come in your mind that this startup is only taking loss, then why are the angels investing in it. So it has huge advantages that's why Angels are investing in it.

There are some reasons for this.


Future Success:- Such startups have a good reputation in the customers and market. Their products have a customer base in market. Investors invest keeping this in mind. Startups have a lot of chances to grow in the future.


Vision: - Often the vision and mission of the loss making startup are of long term. He thinks of future growth instead of thinking about today. Keeping this in mind, investors invest for the future. These startups give good returns later.


Assets: - If the startup is in loss but they have a lot of assets. This is what investors see. Even if startups are closed in future, investors can get their money returns through their assets.


Risks And Challenges Face Angel Investors


An angel investor has to face many challenges. To the maximum risk. An angel investor can never guarantee the success of a startup. This is where their risk starts. He invests only on the idea of those startups and on the trust of their members.


These are some of the risks that angel investors face.


1. Lack of liquidity

Angel Investors always have a risk that if the startup is in loss, then if the time comes to sell their assets. So will anyone buy it or not? Or whether he will get the right price or not. This is the biggest challenge for an investor.


Sometimes it happens that there are no buyers in his market. Here investors are not able to sell their assets easily.


2. Lack Of Control

An investor does not have any control over the startup he invests in. Only its members decide when and what decision should be taken by that startup. This one investor depends only on the members.


If the members are good, then the decisions will be good, otherwise there can be loss many times.


3 Competition

Today there is competition in every field. An angel investor always does a lot of research before investing their money. Where is the competition less? From where their invested money will give quick returns.


4. Exit Strategy

If the investor has to take exit then it is very important for him to have a good exit strategy. If there is no clear exit stratagy, then there are chances of losing money.


If the startup comes with an IPO or if there is an acquisition, then investors can sell their equity and take their money.


Conclusion

Angel Investor has many such ways with the help of which he can earn money and can get a good return on his investment. There is only one challenge in front of an investor in this, that is to find the right investment. There is a lot of risk in investment but there is also a lot of return.