The Angel Investor

by admin

angel investorSo you know about the structure of venture capital firms. Truth is, though, your first funding source (besides friends & family or
bootstrapping) will probably be an Angel investor.

Angels usually invest in the very early stages of a startup (also called the seed stage). A little different from venture capitalists, Angels have a more diverse background. Some are professional investors, some successful entrepreneurs, others are well-to-do techies, and some are just rich people with money to burn (kidding, they would never burn that money by investing in you!). They fit the definition of an accredited individual.

Individual Angel investors usually make smaller investment amounts. It varies, but $25,000 isn’t unusual.

Recently, the rise of the Super Angels has been well-documented. These Super Angels are sort of like mini-venture capital funds. Super Angels are very experienced and well-known entrepreneurs who invest larger amounts than traditional Angel investors. Their experience, money, and connections can really help startup companies.

What You Need to Know

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Angel investors are as diverse as founders. Some are active, while others are passive (the difference between “smart” money and “dumb” money, which is the subject of a future post). If your Angel group is a small group of friends, you should consider setting up a limited partnership as a vehicle for them to invest. Make sure it’s controlled by one of them. This way, they can invest together and you don’t have to chase down 20 people for signatures.

The best time to form relationships with Angels is before you need money. Here in Southern California, Tech Coast Angels is active in the startup community, so it’s pretty easy to meet Angels. As you get to know them, you will develop relationships with Angel investors, making it easier to raise money down the line.

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