About Angels
Most entrepreneurs have heard of Venture Capital firms, but what is an Angel Investor? Generally, angels are high net worth individuals who are willing to invest their own money in start-ups in return for equity and sometimes a seat on the board. Most angels offer advice and often act as a mentor to the company’s owner. Angels differ from venture capitalist in two main ways. First, while venture capitalists invest someone else’s money from a fund, angels are taking a risk with their own money. Secondly, angels usually invest smaller sums in startups than venture capital firms, with sums ranging anywhere from $50 thousand to $5 million.
Angels can range from wealthy doctors and lawyers with no real business experience who want somewhere to invest their money to successful and experienced entrepreneurs who are excited about helping others with a fledgling business, as well as earning a significant return on their investment. It is the latter type of angel that should be preferred by a entrepreneur seeking to fund his company.
How to Find an Angel
So once an entrepreneur thinks an angel investor is the right way to finance his or her company, how does one go about finding an angel?
Traditionally, angel investors were elusive individuals who were contacted through a business acquaintance or a "friend of a friend." The World Wide Web has opened up a new range of possibilities for both entrepreneurs and angels by providing a structured forum to form an investing partnership, without previously established contacts. In addition to connecting entrepreneurs with investors, some online sites provide services such as advice with the development of business models, financing strategies and organizational infrastructure.
Entrepreneurs should investigate an angel investor's reputation and ability to supply funds before they accept his money. If he offers to fund the company's needs in stages, management should ascertain how he intends to meet his funding commitments. Some angels may buy into a company for the long term, but others might want to cash in on their investments in only four or five years.
It is important that an entrepreneur get advice from his attorney and accountant before proceeding with financing from angels or any other type of investor.
What Angels Look for in a Business
The most important thing to remember is that angels invest first in foremost in a talented individual, rather than in an idea or a business. Despite the fact that a trustworthy and dedicated entrepreneur is paramount, angels also focus on opportunities in these areas:
The Garage http://www.garage.com
The Garage’s mission is to help member entrepreneurs find seed capital and member investors find great startup investment opportunities. Startups are screened carefully to find seed level companies with the greatest potential.
Investors are also screened to make sure that they are both qualified and experienced. The service is free to entrepreneurs whose companies are screened, but requires a registration fee for potential investors.
ACE-NET http://www.sba.gov/advo/acenet.html
The Angel Capital Electronic Network (ACE-Net), sponsored by the Office of Advocacy of the U.S. Small Business Administration, is a nationwide Internet-based listing service that connects entrepreneurs of small, dynamic, growing businesses seeking $250,000 to $5 million in equity financing with angel investors.
CapNet http://206.41.12.3/touch/capnet/capsourc.htm
CapNet is a network that helps growing businesses find capital. The service offers users access to a databank of hidden funding sources from members, including angels and other forms of financing. The site also features news, tips, and helpful articles.
Bonus Site http://www.inc.com/incmagazine/archives/27980431.html
Inc. Magazine, "What Angels Want" Author: Jeffrey L. Seglin
This site features a great article on the kinds of companies and industries that appeal to angel investors.