Angel investors are wealthy individuals who put money into startups early on, and receive part ownership of the business in return, which usually comes in the form of equity. Angel investors also advise and assist the founder in growing the startup so that it can begin to generate revenue quickly and reliably.

Valuation is the process of determining the current or future value of a business. There is no single method for calculating valuation, but most approaches draw on factors such as a company’s management team, capital structure, and future earnings potential.

Co-founder disputes are cited as the reason for around 65% of startup failures, according to research by Harvard Business Review. This makes the division of equity between co-founders a key decision that can make or break a startup.

The principal benefit of having an early-stage fund in your capitalisation table is that it can help your startup to raise investment. An early-stage fund investor represents an important vote of confidence in your business.

Investment is important to the founder of an early-stage startup because it pays for the team, the infrastructure, and the prototypes that are needed for them to grow. To a business angel, early-stage investment is important because it allows them to obtain a significant equity stake at a low valuation. This gives them the ability to influence the direction of the startup and by extension the outcome of their investment.

Building a business around monthly recurring revenue (MRR) makes growth more predictable, and provides investors with a useful metric for understanding trends in profitability and cash flow. This makes the MRR business model popular with technology startups that offer software as a service (SaaS). 

Seed investment took a hit during the Covid 19 pandemic, with business angels and venture capital funds (VCs) electing to put more of their capital into late-stage startups such as unicorns with valuations over $1 billion, according to Crunchbase.

As the pandemic recedes, it is becoming clear how profoundly Covid has accelerated digitalisation across the global economy. Covid has created an ideal environment for fintech companies to grow exponentially and deliver strategic valuations for their investors.

The journey from investing in a promising startup to exiting with a high return on investment (ROI) requires close monitoring every step of the way.