They prefer start-ups, want high returns on their money and expect to get their money back after a certain time through a public offering or acquisition. Only one or two angels at a time typically invest in a company. They also bring know-how and contacts along with the capital. Because of their reputations, their participation usually lends an aura of success to the company, Cowen says, which can open doors and create more opportunities for financing. You, as the business owner, pay back your loan plus interest, and if your company prospers, you could end up selling a part of your company to the lender as well.
Warrants can also be part of a licensing deal.
A small company can receive the right to distribute products from a larger company in return for the larger company receiving the right to own stock in the smaller company. Such deals, which can be debt or equity, are not registered with the Securities and Exchange Commission or publicly traded on Wall Street. The securities in a private placement are usually illiquid, meaning they don't trade, and investors usually agree to hold the securities for a certain period. Although investors don't run the company, a board of directors makes management decisions. If you hold majority ownership, you may still run the company.