Who They Are And When Are They Appropriate
Angel investors, in contrast to large venture capital firms, are individuals who invest in emerging business ventures. Angels typically provide both capital and expertise to companies who are in the early stages of development. To reflect the increased risk of investing in such firms, Angels require a higher rate of return versus their other investment options.
Typically, Angel investors will fill a much needed void that exists between self financing or “friends and family” financing, and the larger investments made by venture capital firms. Smaller Angel investors will fund investments in the $50,000 to $100,000 range, while larger investors may contribute up to $500,000 or more towards a startup.
Just because the size of investment is smaller than a venture capital firm, does not mean an Angel investor is any less diligent in analyzing your business. For the most part, they will have the same criteria as venture capital firms and they will want to see your competitive advantages, a significant market size, skilled management team members with experience, and a valuation that will give them a good return on their investment.
In identifying and attracting an angel investor, you should first seek angel groups that are located in your region. Networking is a critical skill in developing relationships with Angel investors. In locating a suitable angel investor, you should first look to find someone with experience in your field, as they can provide tremendous value – not just in terms of a capital investment, but also with industry contacts and operations expertise.