Chipman Mazzucco Emerson LLC

Angel investors offer entrepreneurs more than money

Venture capitalists are often among the first to be contacted when entrepreneurs in Connecticut and around the country are unable to secure startup financing from other sources, but a new way to get the money they need is rapidly gaining in popularity. Angel investors provide business advice and emotional support as well as much-needed cash, and they will generally be more forgiving and less likely to pursue legal claims when the commercial ventures they back fail to meet expectations.

Angel investors are often friends, relatives or close acquaintances who are investing in people they care about and not backing a business plan or idea. They view their investments as a vote of confidence that could be repaid handsomely if the business venture is successful. Arrangements made with angel investors are generally less rigid than they are with venture capitalists, but both types generally obtain a stake in the venture.

Entrepreneurs with few close relatives and friends who lack the financial means to back their business ideas can look for angel investors online. A number of internet platforms have been developed that allow business owners to look for investors with experience or know-how that could be especially useful to them. Entrepreneurs can also access more than 260 angel investor groups or 1,300 individual investors through the Angel Capital Association.

Attorneys with business law experience may suggest that their clients proceed with caution when approaching friends or family members for financial backing, and they could advise them to ensure that any agreements that are reached are properly memorialized. Writing things down and then reviewing the terms of a deal allows all parties involved to reflect soberly on promises made while in the grip of enthusiasm, and approaching these matters more seriously also prevents decades-long relationships from being jeopardized by handshake deals gone bad.

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