It is not rare for businesspeople to invest in companies they don’t own.

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Investors and shareholders are a fundamental part of every business, especially those seeking to take flight.

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Among the types of investments, angel investing pops up as a different breed.

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It includes placing faith on an emerging brand and trusting that it will grow to become successful and a defining player in its industry.

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However, some “angels”, as the investors are usually called, look for opportunities beyond financial gains.

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But what exactly is angel investing? And what benefits does it provide angels with?

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Keep reading to find out!

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Understanding angel investing

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Angel investing involves affluent individuals providing financial support to startup companies in exchange for an ownership stake.

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That is money in exchange for owning part of the company.

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Unlike traditional forms of investment, like stocks or bonds, angels invest directly in small businesses with potential to grow, yet still not fully developed.

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These are often at their early stages when traditional funding sources might be scarce.

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This financial injection helps startups cover initial expenses, scale their operations, and sort the challenging early phases of business development.

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But what, then, is the opportunity for the angels?

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1. Profit

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The first and more obvious allure of angel investing is the potential substantial returns.

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Angels are drawn to the promise of future success and take calculated risks on innovative ideas that conventional investors might overlook.

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This early-stage investment is crucial for both parties.

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On the one hand, it grants the startup the opportunity to grow.

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On the other hand, it positions the angel investor for significant returns from a thriving business that may attract larger investments.

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It guarantees dibs on larger parts of profit before others jump at the opportunity.

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However, this strategy isn't solely motivated by profit.

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2. Insights

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Angels often have a desire to connect with visionary minds and stay on top of cutting-edge developments.

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By immersing themselves in the startup world, investors gain insights that extend beyond monetary gains.

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The world of angel investing becomes a classroom where participants learn about emerging trends, disruptive technologies, and the pulse of innovation.

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3. Networking

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Successful angels may become mentors, offering strategic guidance and industry insights to the startups they support.

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Angel investing is all about collaboration.

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Seasoned entrepreneurs pass on their knowledge to the next generation of innovators, all while learning how to stay competitive in the current market.

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The opportunity for new experiences, industry insights, technologic literacy, and networking play a big role when choosing to become an angel investor.

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4. Diversification

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Engaging with startups provides investors the opportunity to diversify their portfolios. 

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By actively participating in groundbreaking ventures, angels become more well-versed in multiple areas of the business world.

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They also gain experience as investors, knowing how to manage different situations and conflicts in varied markets and industries.

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It is not merely about injecting funds but also about personal development.

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Safety net

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Investing, of course, is a risk.

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The startup with potential may not grow as expected.

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So, angels often cast their nets wide, investing in a range of sectors to mitigate risks and increase the likelihood of discovering the next big success story.

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Diversification isn’t only about gaining experience and knowledge, but also about safeguarding investments.

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It’s all about taking calculated risks with sturdy safety nets.

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Becoming an angel

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Angel investing is not a mere financial transaction.

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Investors often use it as a door into the world of innovation, learning, and collaboration. 

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It requires being able to look beyond immediate financial gains, but without forgetting about them, of course.

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Getting immersed in the startup environment –especially for someone who got used to being among the bigger players– provides insights on what’s next and trendy.

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Mingling with and mentoring up and coming talent fosters a nurturing collaboration for all parties.

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And investing in multiple endeavors helps angels be more holistic and seasoned.

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If you’d like to hear about an angel investor’s experience from his own words, check out this week’s episode of TOP CMO with Shake Shack’s CMO!

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