In 2007, more than 258,000 angel investors in the U.S. invested $26 billion in more than 57,000 deals. Whether you'd like to become an angel investor or need an angel to breathe life into your own business concept, understanding angel investors basics will bring you closer to realizing your goal.
Angel investors look for opportunities with companies in very early development stages. While technology projects rank as favorites for angel investors, other areas often get funded, too. Most investors in angel financing primarily work with companies they understand and can lend their expertise to. Keep in mind the following about angel financing, which serves as a gap filler for start-up financing:
1. Angel investor transactions typically run between $25,000 and $100,000 for individual angels and up to $1 million for angel groups.
2. Angel investors usually decide within a few weeks whether to fund a project, so entrepreneurs don't wait as long as they would with venture capitalists.
3. In most cases, angel investors prefer dealing with individuals/companies in close physical proximity for ease of hands-on involvement with the new venture.
Learn more about the concept of investment angelsAngel investors, typically wealthy individuals once entrepreneurs themselves, invest their own capital in new ventures. Small business angel investors in networks/groups (about 20% of all angels) pool capital and research to help new companies, thus allowing smaller individual investments in larger projects. Pure in motive, they've grown successful in their own businesses and now want to help others achieve success, but they also expect to make a large return on their investment. Because of the risk to the angel investor, he/she will often require a return of at least 15-20 times the initial investment within roughly five years and an exit strategy consisting of either an initial public offering or acquisition.
Center for Venture Research at the University of New Hampshire, an organization focusing primarily on early stage equity financing for high growth ventures. Through its website, gain access to angel investor market analysis reports, working papers and other publications regarding angel investment.
Link to other angel investors or an angel investor network to take part in larger projectsIf you'd like to join in with other angel investors on different projects, look for networks and groups in your area.
Find a business angel investor or angel investing group to help bring your idea/product to fruitionFinding your angel investor may turn out to be as simple as an Internet search. Find angel investors through local business channels like your chamber of commerce or professional networking organizations like Business Networking International, which could also help you link with international angel investors.
- Do not sign any agreements without consulting your attorney. You might be signing over ownership of your company to your angel investor.
- Look for local investor forums in your state that cater to venture capitalists and angel investors for excellent opportunities to network and find leads on new start ups.