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Lifestyle Businesses or I Want Money to Build a Nice Profitable Business

If you want to build a business that will generate great cashflow and profits you can live off for a long time, angel investment is generally not going to be for you. Angel investors like to see cashflow and profit or a plan to get to these things, but they earn their returns by companies they invest in having liquidity events which means their companies go public (IPO) or get acquired for a multiple over what they invested. A multiple means that the valuation that the companies they invested in have seen their valuations increase significantly typically by 5 to 7x or 10 to 12x depending on the angel investor.

If you want to build a profitable business you can live off for some time, you may hear from angel investors that you are building a lifestyle business. A lifestyle business does not mean you will work any less hard than an angel-backed startup. It may just mean that:

  1. The opportunity doesn’t seem big enough for both you and the angel
  2. The industry your business is in doesn’t align well with what the angel likes to invest in

Unlike venture capitalists where lifestyle businesses are to be avoided at all costs, you may find angel investors willing to invest in a lifestyle business for a cut of ongoing profits, revenues or cashflow. Because they are not investing on behalf of a fund, they have some additional latitude in terms of what a return could look like.