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Funding 101: Prep

 

Profile of an Angel Investor

Your typical angel investor is going to have been a successful businessperson or entrepreneur that is looking to put some of their earnings to work in an investment they really feel passionate about.

Make no mistake, the business of an angel investor is to make money. But there is a very personal attraction to each deal that makes working with an angel investor different than going to a nameless, faceless bank.

High Net Worth Individuals

The typical angel investor is someone who’s net worth is likely in excess of $1 million or who earns over $200,000 per year. Incidentally those look a lot like the credentials of an accredited investor. Realize though, that the angel investor is playing with their own money, not invested capital, so even though they may be a high net worth individual, they are still looking at money coming out of their personal bank account.

Makes a Few Investments

Most angels invest part time and therefore only have the resources to review a small number of deals.

Angel investors are limited by two factors – their time and their capital. Unlike professional investors like a venture capital firm, angel investors typically work with their own deal flow, which requires them to spend quite a bit of time sifting through new ideas to find something they want to dig into.

Aside from their time, angel investors have a relatively limited amount of funds to play with, so they have to be a lot more selective about who gets a check. A typical active angel investor may make just a couple investments per year.

Value Beyond Just Capital

Since angel investors were often successful in their own careers, having access to their experience and rolodex is sometimes even more valuable than the capital they invest.

The check is nice, but a strategic angel investor that can give you access to a customer that you would have never had a relationship with is even better (we all love revenue, after all). You may find that picking the right angel investors isn’t just about capital, but about access to resources you need to drive the business forward.

Gateway to Larger Capital Sources

Angels are one of the most trusted sources of new deal flow for larger capital sources such as lenders, private equity firms and venture capital firms – not to mention other angels. They may also help you syndicate your deal with other members of their angel investor group that they are a part of.

A venture capitalist, for example, relies on these angel investors to figure out whether the business has traction and momentum enough to warrant a larger investment. As such, you’re going to rely on these early angel investors to be your most valuable asset in follow-on funding as your grow.

Investing Gets Personal

Just about every other form of capital, like a bank loan or a venture capital investment, tends to focus on the deal and the capital. A deal with an angel investor, however, tends to be a lot more personal. There is often very little to go on in the idea stage, and the angel investor knows that. They are more likely to invest in you and your idea than the mechanics of the business itself. Later on when you start talking to larger professional capital sources, it’ll be a lot harder to get by just based on relationships and ideas.

A Few Angel Investor Profiles

If you’re trying to find angel investors for your own deal, you should start with our investor search to identify who might be the right fit for your business.