Finding Your Guardian Angel (Investors)

Angels are known to get us through our difficult times. Angel investors are then affluent individuals who can provide you capital for your early stage ventures or start-up companies. Handling the finance at your budding years and to keep your company afloat can be quite a struggle when it’s difficult for you to secure loans from financial institutions especially when you don’t have a strong credit history or background.

Image: The Wall Street Journal

There are many definitions of “angel investors” but they usually describe high net-worth investors or high-income earners who invest their personal disposable incomes in start-ups or very early stage businesses in exchange of ownership equity ranging between 10% and 30%.

Image: Historic Toronto

The term “angel” came from the Broadway theater when wealthy individuals provided money to propel theatrical productions that otherwise have had to shut down. In 1978, William Wetzel, a professor at the University of New Hampshire used the term “angel investor” to describe the investors that supported entrepreneurs while he was studying on how entrepreneurs gathered capital.

Angel investors may provide a one-time investment to get the business going and to support through its difficult early stages. Angel investors are focused on helping start-ups rather than the profit they may or may not get from the business. Thus, they tend to provide more favourable terms compared to other lenders since they usually invest in the entrepreneur starting the business rather than the viability of the business.

Angel investors are often among family and friends. They can also be retired entrepreneurs who may be interested in investing their own private funds for other reasons which include getting involved with current business scene, mentoring entrepreneurs and sharing their experiences as well as network.

Another credible way of searching an angel investor is through MBAN which stands for Malaysian Business Angel Network. MBAN is the official trade association and governing body for angel investors and angel clubs in Malaysia. It is also responsible for the accreditation of individual angel investors and angel investors clubs.

To be accredited as an angel investor, you must either be a high net-worth individual with net personal assets of RM3 million and above or its equivalent in foreign currencies or a high-income earner with a gross total annual income of not less than RM180,000 in the preceding 12 months.

Angel investors typically use their own money, unlike venture capitalists who take care of pooled money from many other investors and place them in a strategically managed fund.

Thus, investments made must be in cash and paid in full in return for ordinary shares and must not exceed 30% of the total equity of the invested company.

The minimum investment eligible for tax deduction also which sums up to RM5,000 and up to five approvals per year are allowed. The invested start-up must also be incorporated in Malaysia, 51% Malaysian-owned and does not have any familial links to the investor.

So, for any start-up entrepreneurs and owners out there who are having troubles in getting funds to keep your business going at the early stages, have a look in consider angel investing and check out MBAN.

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