Angel Investors | Get
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An angelinvestor (business angel in the
UK, or simply angel) is an affluent individual
who provides capital
for a business start-up, usually in exchange for ownership equity.
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Angel Investors
| Angel Investor Network
Business 'angels' are high net
worth individual investors who seek high returns through
private investments in start-up companies. Private
investors generally are a diverse and dispersed population
who made their wealth through a variety of sources. But the
typical business angels are often former entrepreneurs or
executives who cashed out and retired early from ventures that
they started and grew into successful businesses. These
self-made investors share many common characteristics:
They seek companies with
high growth potentials, strong management teams, and solid
business plans to aid the angels in assessing the company’s
value. (Many seed or start ups may not have a fully
developed management team, but have identified key
positions.)
They typically invest in
ventures involved in industries or technologies with which
they are personally familiar.
They often co-invest with
trusted friends and business associates. In these
situations, there is usually one influential lead investor
(“archangel”) whose judgment is trusted by the rest of the
group of angels.
Because of their business
experience, many angels invest more than their money. They
also seek active involvement in the business, such as
consulting and mentoring the entrepreneur.
They often take bigger
risks or accept lower rewards when they are attracted to the
non-financial characteristics of an entrepreneur’s proposal.
Angel capital fills the gap in
start-up financing between the "three F"s (friends, family and fools)
and venture capital.
While it is usually difficult to
raise more than $100,000 - $200,000 from friends and family, most
venture capital funds will not consider investments under $1 - 2
million. Thus, angel investment is a common second round of
financing for high-growth start-ups, and accounts in total for more
money invested annually than all venture capital funds combined ($24
billion vs. $22 billion in the US in 2004, according the University of
New Hampshire's Center for Venture Research.)
bear extremely high risk, and thus require a very high return on
investment. Angel investors typically seek a return of at least
10-20 times their original investment within 5 years, through a
defined exit strategy, such as plans for an initial public offering or
an acquisition. Angel financing can thus be an expensive source
of funds. However, cheaper sources of capital, such as bank financing,
are usually not available for most early-stage ventures.
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Angel investors are often retired business owners or
executives, who may be interested in angel investing for other reasons
in addition to pure monetary return. These include wanting to keep
abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs, and making use of their
experience and networks on a less-than-fulltime basis. Thus, in
addition to funds, angel investors can often provide valuable
management advice and important contacts.
According to the Center for Venture Research, there were 225,000
active angel investors in the U.S. last year. Beginning in the
late 1980s, angels started to coalesce into informal groups with the
goal of sharing deal flow and due diligence work, and pooling their
funds to make larger investments. Angel groups are generally local
organizations made up of 10 to 150 accredited investors interested in
early-stage investing. In 1996 there were about 10 angel groups in the
U.S.; now there are over 200. In January, 2004 the not-for-profit
Angel Capital Association was formed under the auspices of the Ewing
Marion Kauffman Foundation, bringing together over 100 of the most
active angel groups in the United States.
In 2004, according to the Center for Venture Research, 18.5% of deals
that got through the early screens of angel groups and were presented
to investors attracted funding, up significantly from 10% in 2003,
which is about the historical average. On average, each firm that
received angel money in 2004 got $469,000. The lion's share went to
high-tech companies, and the single biggest category within high tech
was software.
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page is dedicated to
Angel Investors | Get
Funding From Angels
and is not meant to be financial advice.
Angel Investors | Get
Funding From Angels | Angel Investor Network
