Last year saw a record number of people become what is known as angel investors, which is where you back a startup business to help fund their venture. It is risky due to most startups failing, but if things go well, it can come with a big payoff.

That might intrigue you enough to want to try it for yourself, but there are certain criteria you need to meet if you want to be an angel investor. A post on the Angel Investment Network breaks down the process.

To even be eligible, you need to either have a net worth exceeding $1 million, or you need to be making a salary above $200,000. That latter number is increased to $300,000 for married couples.

Such prerequisites are an intentional safety net given the risky nature of these investments. Given the higher than normal odds of you losing money doing this, limiting it to people who are already wealthy helps prevent anyone from doing irreparable harm to their assets.

As far as how much to invest in a project, the typical amount is between $25,000 and $100,000.

It should also be noted that many investors do more than one angel investment at a time. That way if a couple fail, there are still other prospects that could make up for the lost funds. Generally, investors might go with ten or more angel investments at a time.

Lastly, you also need to have patience as an investor. It can frequently take ten or more years for you to see what the results of the startup project will be. However, you do have the freedom to learn more about each startup before putting your money in, so you can conduct your own research into how likely it is to succeed.

Fred Hubler, Chief Wealth Strategist for Phoenixville-based Creative Capital Wealth Management Group, a wealth management practice that services wealthy families in 28 states and specializes in retainer-based planning and alternative investment strategies, likes private equity of more established companies over the angel investors.

”For most of our clients, they don’t have the time to cherry-pick angel investments, so we have them go into a fund of funds of private equity programs,” according to Hubler. “Bottom line, they get much more diversification and they are offsetting the due diligence to the private equity firms we select who do this for a living.”

While you no doubt want to make money on your investment, even if it does not work out, as the name angel investor suggests at least you gave a startup the gift of trying to make something of themselves.

If you want to know more or start looking into investment now, be sure to consult the post from the Angel Investment Network here.

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Want to know if you’re on the right path financially? Fred Hubler’s Second Opinion Service (SOS) is a no-obligation review with Creative Capital Wealth Management Group‘s Chief Wealth Strategist.

It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.

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