Identify a key benefit of using angel investors to start a business.

Identify a key benefit of using angel investors to start a business.

• A. Angels accept a lower investment return, only when the business starts to make money does an angel expect to be paid back
• B. They provide no mentoring
• C. They always insist on full control of daily operations
• D. They require collateral for loans

Answer: (A)

Angels provide funding in a flexible, equity-based way, with returns that come from the business’s success rather than fixed debt payments. Because they invest for ownership and a potential upside, they’re willing to wait for a payoff until the company becomes profitable or is sold. This patient-capital approach means they don’t require collateral and don’t push for immediate repayment like a loan. The option that best fits this idea is the one that describes returns as occurring only when the business starts to generate money, reflecting how angel investments are typically rewarded through future value rather than routine payments. While angels often offer mentorship and guidance, the other choices misstate common practices: they don’t generally provide no mentoring, they don’t always seek full control, and they don’t require collateral.

Angels provide funding in a flexible, equity-based way, with returns that come from the business’s success rather than fixed debt payments. Because they invest for ownership and a potential upside, they’re willing to wait for a payoff until the company becomes profitable or is sold. This patient-capital approach means they don’t require collateral and don’t push for immediate repayment like a loan. The option that best fits this idea is the one that describes returns as occurring only when the business starts to generate money, reflecting how angel investments are typically rewarded through future value rather than routine payments. While angels often offer mentorship and guidance, the other choices misstate common practices: they don’t generally provide no mentoring, they don’t always seek full control, and they don’t require collateral.