at least a quarter-million of whom reside in the United
States, with diverse motives and experiences, there is no
such thing as a prototypical angel. Still, some broad conclusions
can be drawn. Data compiled by the International
Capital Resources, based on a survey of 1,200 investors in
1999 and 2000, shows most angel investors to be men between
46 and 65 years old. Many of these investors have
postgraduate degrees and extensive business experience.
Commonly, angels owned, and then sold, their own companies.
Having had to raise money for their businesses, many
have experience in dealing with investors. They understand
the risks of early-stage investments, and also the potential
for high returns.
Most angels prefer to invest close to home. However, recent
research has shown that perhaps one-third of all angels
believe that geographic proximity to the venture is not a major
concern. What matters more is the need for the lead investor,
whether another angel or some other party, to be close to the
deal and that he or she is known and respected.
Compared to venture capitalists, angels have a more flexible
attitude toward the types of businesses they consider investing
in. Also, because the amounts at stake are usually far
smaller, they tend to move faster than VCs. About half of all
angels need less than a month after first seeing the business
plan to decide whether to invest. The due diligence process of
the venture capitalist means that only rarely can deals be
struck so quickly.
The background, interests, and industry specializations of
angel investors vary widely, but most fall into one of the following
categories (although it should be noted that some investors
exhibit characteristics of two or more angel types, and
that the nature of a particular angel’s participation can vary
from one investment to the next).
• Entrepreneurial angels. These investors are sometimes
prepared to invest larger sums and take bigger risks
than the average angel. Most own and operate a
successful business, or have done so. Their investments
can run as high as $500,000, but are often far
less. Such angels diversify to avoid being overly dependent
on any one investment. Most entrepreneurial
angels insist on board representation, but normally
do not interfere with the day-to-day management of
the business.
• Lifestyle angels. Investors of this type consider investment
mainly as a hobby. Generally they are not involved
in managing the business or advising the entrepreneur,
and thus take a passive role. Their investments can be as
low as $10,000, but may run into the low six figures.
• Profession-based angels. These angels are linked to a
profession such as medicine, law, or accounting, and
prefer to invest in companies suited to their expertise
and experience. Although they will not be too actively
involved in the entrepreneurial process, they will share
their capabilities and knowledge. Their investments usually
range from around $25,000 to the low six figures.
• Altruistic angels. These investors are motivated both by
financial profit and by the desire to do good. The Community
Development Venture Capital Alliance, a nonprofit
organization based in New York, is devoted to
bringing together such investors with capital-seeking
entrepreneurs.
• Alliance angels. These angels invest in groups. Many
such investors lack the necessary background to coach
entrepreneurs, and thus tend to be passive, although an
important subset does have relevant professional experience
and thus tends to take on more active roles in the
businesses they finance. One element that these angels
have in common is that they seek to share risk with others
or to participate in deals that would otherwise be
too big for one investor. They sometimes operate
through informal networks known as “angel alliances.”
These alliances usually hold meetings on a routine basis
and, if interested in a particular proposal, will decide
quickly whether to invest. One of the better-known examples
is the Band of Angels, based in Silicon Valley. Because
it pools capital from lots of angels (more than 100
at last count), its average investment is over $500,000.
This level of investment is similar to the smaller deals
done by venture capitalists.
Read More : TYPES OF ANGEL INVESTORS
