Becoming An Angel Investor
Why should you start Angel Investing?
Angel investing provides investment opportunities with incredibly high ROI potential but, can also be somewhat risky. Before you start investing it’s important to understand why you want to invest and how to do it safely.
Investors start angel investing for many reasons. Attractive return on investment, diversification, leveraging expertise to help budding entrepreneurs, and giving back to the community are all common reasons. Many angel investors are entrepreneurial people who feel that they could help businesses succeed by passing on the lessons they’ve learn over the course of their career. They feel that the capital they invest is merely a way to align their incentives with the company give them a seat at the table.
Today, angel investors fill the gap between the small-scale financing provided by family and friends and that of venture capitalists. They provide initial funding to fledgling businesses during a period when the risks of failure are relatively high and most investors aren’t prepared to back them.
Headwaters Angel Network members invest in those traditional “angel” rounds but are also available for later-stage investments as businesses continue to grow and prosper.
SEC Regulations
Information provided by www.sec.gov
The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.
The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.
Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or fid an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as “accredited investors”.
One of the major sources of information on which the SEC relies to bring enforcement action is investors themselves — another reason that educated and careful investors are so critical to the functioning of efficient markets. To help support investor education, the SEC offers the public a wealth of educational information on their Internet website, which also includes the EDGAR database of disclosure documents that public companies are required to file with the Commission.
For more information, visit the U.S. Securities and Exchange Commission website.