If you ever plan to begin a business, you will realize the desperate need for funds right from Day one. You need the initial cash to setup the basic requirements for your startup. This is where pre-angel funding comes into play.
Before I get into the concept of pre-angel funding let me talk Angel Funding. Angel funding is also known as Angel investment.
What is Angel Funding?
Angel funding is the capital that is provided to a start-up for kick starting its business. There are angel investors who provide capital to start ups based on their business plan. If the business plan is quite strong and seems to be a profit making venture then an investor would be ready to invest in the startup.
In return, the angel investor receives a part-ownership or share in the company. Thereby, he earns profits via startup investment.
A prime example of this kind of funding can be seen with the start of Facebook. When Facebook hit a brick wall with its expansion plans it was Peter Thiel (Founder of Paypal) who came to their rescue by offering them millions of dollars of funds for expansion.
Why are these investors called as Angels?
These investors are no less than angels. More often than not, these investors pump money into a startup at a time when they are low on funds or need to expand rapidly to capture a market. The Facebook story is a prime example. Another good example is that of Google, the first funding for Google as a company was secured on August 1998 in the form of a $100,000USD contribution from Andy Bechtolsheim, co-founder of Sun Microsystems. Back then Google was not even yet incorporated. So we can see here that these are two companies that are standing where they are today because of the belief of their Angel investors.
What is Pre-Angel Funding?
This brings us back to Pre-angel funding. Before an angel investor actually begins to trust your business startup you need to show some progress. Unfortunately, even the “some progress” of a startup needs money. This money comes from pre-angel funding and this comes from your family and friends.
The pre-angel funding is more of loaned out money and you need to pay it back to them. Unlike, angel investors who acquire a stake or part-ownership to your company.
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