Entrepreneurship: How to tap into angel investing

| Print |  Email
Saturday, July 01, 2006

Angel investors are typically high net worth individuals and “cashed out” entrepreneurs who are interested in mentoring other entrepreneurs and sometimes get actively engaged in the businesses they back. The Center for Venture Research, at the University of New Hampshire, estimates that angels pump $25 billion into tens of thousands of startups annually.

In the past, angels have typically operated solo. But in a trend that is gaining momentum nationwide, angels are forming groups in order to pool resources and expertise, generate investment ideas and create a formal screening process to pinpoint the most promising prospects.

Here are tips about finding and approaching angels, from the Angel Capital Education Foundation:

1. Angels are not venture capitalists (VC). Angels invest their own personal funds in a business. VC money usually comes from institutional sources. Angels also back startup and early-stage businesses, while venture capitalists prefer later-stage companies. Individual angels invest $5,000 to $100,000, while VC investments go $2 million and up.

2. To attract angel interest, be willing to give up some ownership or control of your business, and be able to show a significant return within three to seven years, as well as a profitable exit strategy.

3.
Seek angel funding when: a) your product is fully developed; b) you’ve already invested your own money and exhausted other alternatives (like family and friends); c) you have existing or confirmed potential customers; d) you can demonstrate that the business is likely to grow fast and can pass $10 million in revenues within three to five years.

4. Angel groups come in many forms, but generally share these traits: Members help screen firms and commit to a certain amount of investments yearly. Groups meet regularly (often monthly) to hear investor presentations. Member angels decide individually whether to invest in a business. Members work jointly to validate plans, statements and entrepreneur backgrounds.

5. While angel group sizes vary widely, the median pooled investment per round is around $400,000. Some groups focus on specific areas, such as technology, but most are open to a variety of industry sectors, including software, medical devices, services and manufacturing.

— Daniel Kehrer, Bizbest Media

 

More Articles

7 industry trends of 2015

The Latest
Friday, January 09, 2015
covertrends15-thumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

Industry groups identify top trends for 2015.


Read more...

The Carbon Calculus

February 2015
Friday, January 23, 2015
BY KIM MOORE | OB RESEARCH EDITOR

Carbon pricing is gaining momentum in Oregon, sparking concern for energy-intensive businesses — but also opportunity to expand a homespun green economy.


Read more...

All Rise

March 2015
Friday, February 20, 2015
BY AMY MILSHTEIN | OB CONTRIBUTOR

Don’t just sit there. For a healthy workplace, move up and down — and all around.


Read more...

A legislative preview — and celebration

Linda Baker
Friday, January 23, 2015
012315-speaker-thumbBY LINDA BAKER | OB EDITOR

The Northwest Environmental Business Council previews the 2015 legislative agenda as Hatch Oregon celebrates Oregon's new community crowdfunding rules.


Read more...

Closing the Gap: The two Oregons and the way forward

February 2015
Monday, January 26, 2015
BY JOE CORTRIGHT

"Nostalgia is not an economic strategy."


Read more...

Downtime with the president of NAI Norris, Beggs & Simpson

March 2015
Monday, February 23, 2015
BY JESSICA RIDGWAY | OB CONTRIBUTOR

Live, Work, Play: Catching up with Chris Johnson.


Read more...

4 married couples who work together

The Latest
Thursday, January 22, 2015
IMG 0020BY JACOB PALMER | OB DIGITAL NEWS EDITOR

They say maintaining a healthy marriage takes work. So does running a business with your spouse.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS