In
addition to cash, a good angel investor can provide meaningful
introductions to sources of financing, credit or vendor
relationships, even help you hire new executives.
As
with any type of investor, however, never accept an equity
investment without having a reasonable plan of how you will
provide a return on that investment. While angel investors
typically enjoy helping a company grow in a more hands-on
way than the average investor, don't lose sight of the fact
that their primary motivation is a return on their investment.
And it's not enough for your company just to become profitable.
You need to be ultimately able to provide a cash return
on investment within a five- to seven-year time frame.
A
cash or liquid return is usually achieved by selling the
business or taking the business public and allowing an investor
to sell their shares to someone else through the public
markets or through a repurchase agreement. Sometimes there
is a redemption agreement to buy out the shareholders.
