Monday, December 19, 2011

Who are angel investors?

An interesting fact that I recently discovered is that the term angel investor actually came about through those individuals who first helped fund and invest in plays on Broadway, who were then called “angels.”

I like to define angel investors as both mentors and advisors to early-stage companies. They are often successful executives, experienced entrepreneurs, and high net-worth individuals (defined by the SEC as accredited investors with annual incomes over $200,000). Angels have a passion for early-staged ventures and often want to be engaged and involved with the companies whenever they can. When they listen to pitches or meet new startups they are usually constantly thinking about how they can help make the company better.
When looking for angel investors, aim to find those who have a strong expertise in your industry, who are passionate, who are willing to mentor you and your company, and who have a large extended network of other angels or connections with the VC community.

Angels like to typically invest within an organized group. Angel groups often have around 20 members and meet every month or so to listen to pitches from entrepreneurs for the opportunity to decide whether or not they would be willing to invest in the company. The whole angel investing process can typically take 3 months from the initial contact with the company since there is a pre-screening, screening process, investment committee meeting, diligence and then the structuring of the deal. Most angel groups will aim to wrap up a deal eight weeks after agreeing to invest at their investment committee. Some angel groups may also have presenting fees, which can vary from a few hundred dollars to thousands of dollars. The groups charge fees either to help manage overhead costs or to make sure that the entrepreneurs presenting are serious about raising angel capital.

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