1. Lower Risk: Compared to other investments, angel investing carries a lower risk. Because the investor has control over their money, they can decide when and how much money to invest in each startup. This gives them more control over their returns, which reduces the risk of loss.
2. High Returns: Angel investments can provide high returns if the investment is successful, since the investor owns part of the company and receives dividends from it when it makes profits. This can be a great way to generate passive income over time.
3. Learning Opportunity: Investing in startups provides an opportunity for the investor to learn more about various businesses and industries. By being involved in the process of helping a company get off the ground, angel investors can gain valuable experience while also making money.
1. Limited Liquidity: Angel investments are usually illiquid, meaning they cannot be easily converted into cash quickly. This means that if the investor needs money quickly, they may not be able to get it from their angel investments.
2. High Risk: Angel investing is high-risk because most startups fail and investors can lose their entire investment if the startup does not succeed. Additionally, it can take several years for a startup to become profitable, so investors must have patience and be willing to wait for a return on their investment.
3. Time Intensive: Investing in startups is also very time intensive, as the investor must invest significant amounts of time researching and evaluating potential investments. Additionally, angel investors often need to help the startup with other tasks such as networking, providing advice, and offering moral support. This can be a big commitment for the investor.