As the glitz and glamour of the startup scene dominates the stage, it’s sometimes all too easy to forget the unsung heroes of financing: angel investors. Typically, angel investors provide the capital to startups when the scope of the need is too big for friends & family, but too small for venture capital firms.
What’s an angel investor? An angel investor is an affluent individual who provides capital for a startup in exchange for convertible debt or ownership equity. Angels, as they’re often referred to, can also provide valuable management advice and important contacts to growing startups.
Why engage in angel investing? Even though angels are investing at the most risky stage of a company’s life, make no mistake – many are extremely sophisticated, and are banking significant returns. Savvy angels have time-tested diligence processes, actively participate in the growth of companies, and have investment portfolios that are extremely valuable.
What’s an angel group? Some angel investors organize themselves into groups in order to share research and pool their investment capital, as well as to advise companies in their portfolio. Just 20 years ago, there were only about 10 angel groups in the US. Today that number has grown to more than 300. Angel groups are usually local organizations and are made up of anywhere between 10-150 accredited investors. With the advent of equity crowdfunding and online investment platforms like OurCrowd and AngelList, angel investors are now able to participate in startup investing far beyond their locales. Through online collaboration, angels can gather and share information on deals, strategies, and pool together capital.