Angel investing article list

Some 36,000 entrepreneurial ventures attracted $15.7 billion in angel investments last year, according to the University of New Hampshire's Center for Venture Research (www.unh.edu/cvr). Anywhere from 150 to 175 angel networks -- dinner clubs and the like -- are in operation across the United States, with each having about $5 million to $20 million in capital under management, various industry estimates show.

Business angels are investors in great ideas. They fill a capital gap between "friends and family" and VCs. Estimates of the number of angel investors in the US and Europe vary because there are no registration requirements. But the power of angels lies in the sheer number of companies they fund; some studies suggest angels invest in 10 to 20 times more companies than VCs.

From a purely legal standpoint, an "angel investor" (or business angel investor) is a "high net worth individual", usually an accredited investor (as the term is defined in Regulation D under the Securities Act of 1933 or SEC Rule 501) who invests his or her own funds in private companies, typically at the seed and early stages. To most companies, though, angel investors are much more: they often bring expertise or affinity for that company’s product, market or management team, in addition to taking additional financial risks. Many serve as active advisors or mentors for entrepreneurs, provide additional relationships to aid the business’ growth, and supply industry and entrepreneurial experience.

Angel investors are individuals who invest in businesses looking for a higher return than found in traditional investments, and who often relish the thought of being a coach, a hands-on team member, or giving something back to the community. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground. Angels usually provide the bridge capital from the self-funded stage of the business to the point the business qualifies for the level of funding provided by professional venture capitalists (VCs) or corporate strategic partners.

Because he or she is interested in adding value to the company, it's important for any business person thinking of accepting investment from an angel investor to be very clear about what the angel investor is bringing to the deal besides money, and to develop an understanding of what the angel investor would be like to work with.

The Angel market has achieved a sustainable growth rate (of new investors) between 12-14% annually. This trend had been evident over the last few years, when the effect of the 2000 bubble is taken into account. However, sustainable growth requires a reasonable augmentation in active investors, and thus, level of participation is an important consideration. While the number of individuals that are members of angel groups are increasing, there is a larger percentage of latent angels (individuals who have the necessary net worth, but have never made an investment). In 2002, 40% of the membership in angel groups were latent angels.

Approximately one in 10 start-up or early-stage companies in the U.S. receives equity capital from angel investors. Angel investors, on an individual basis or through groups, may invest up to 90 percent of the independent equity that early-stage businesses receive. Angel organizations are important because they help individual investors combine their funds with other angels, lead to better investing practices as members learn from one another, and make investors more accessible to entrepreneurs as groups publicize their existence in their communities.

The term "angel" comes from the practice in the early 1900's of wealthy businessmen investing in Broadway productions. Today "angels" typically offer expertise, experience and contacts in addition to money. Less is known about angel investing than venture capital because of the individuality and privacy of the investments, but the Small Business Administration estimates that there are at least 250,000 angels active in the country, funding about 30,000 small companies a year.

Entrepreneurs who launch smaller-scale enterprises know that commercial banks generally don't lend funds to ventures with little or no assets, customer base or sales track record. And venture capitalists typically work with business concepts that are already up and running with the potential for multimillion dollar revenues. Many of the owners of smaller firms have heard that "angel investors" can provide funding and even some much-needed expertise and referrals for these in-between business deals.

Reaching out to local angel investors can enable a CDVC fund to leverage its own capital to achieve its social mission. Further, angel investors are typically "hands on" types, often entrepreneurs themselves, who can bring with them particular industry expertise and contacts that the fund itself cannot provide. Entrepreneurs often state that the value of an angel's expertise often exceeds the money put into the company.

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