What You Probably Don’t Know About Angel InvestorsAW WebBiz & Social Media Blog

The handful of angel investors I’ve met were moderately affluent, 40ish yuppies who seemed to enjoy the thrill of having a front row seat at the game of business. Being an angel investor is nothing like the risk of being an entrepreneur, since all their eggs aren’t in one basket and a deal gone South is not going to make or break them. But, hey I’m glad they’re out there and occasionally willing to take a flier on a young company.

Angels usually invest in groups of 2 to 5, so when you hear how much money each of them invests, remember there will likely be more than one looking at your deal, so the amount of cash invested could go higher.

Angels invest in 50 times the number of deals venture capitalists invest in, which is a pretty good clue as where to look for money, at least in the initial stages of a business. Another differentiating factor is, angel money is very patient money, and they are willing to wait a number of years, far longer than a venture capitalist, for a return on their investment.

There are probably active angel investor groups in your city. Ask your banker, lawyer or accountant to help you identify them, and, if possible, introduce you. I’ve also provided a list of angel directories below, but the best course is always to find a business person or lawyer to give you a personal introduction to a local group.

For more detail about angel investors Anita Campbell over at | Small Business Trends always has a sound and pragmatic take on business issues. She has written about a new book by her colleague Scott Shane, one of the Small Business Trends Experts. Anita says in Fool’s Gold: The Truth Behind Angel Investing in America :” Scott (is) someone always ready with the facts. Often those facts are contrary to popular belief or common wisdom. Very often he floats a provocative idea that challenges you to think.

For instance, you may have had the notion that individual angels are rich — or at least very well off — and invest a lot of money in each business. Not necessarily so, says the new book “Fool’s Gold: The Truth Behind Angel Investing in America.”

You might wonder how a book of facts and data could help you as an entrepreneur. That’s easy. From information gleaned you can get a much better idea of such things as:

why angels invest (it may be as much about having a hobby as making money)
how angels decide on which businesses to invest in (with less investigation than you’d expect)
how angel investors come up with valuations and what kind of ownership interest they will expect (most don’t do formal valuations and they demand smaller ownership stakes than you might expect)
where and how to find angel investors (hint: look locally)

All of these things will help you understand how to appeal to angel investors. I put together the following chart with a handful of the many misconceptions and the corresponding real facts, so you can see the kind of information the book can give you (this is a small sampling):

Thanks to Anita for that eye opening chart!

To help get you started, if you’re searching for an angel, Inc. compiled a list of U.S. angel networks. Because many angel groups limit their investments to a particular geographical area, we’ve divided the list into eight regions: Pacific Northwest, Southwest, Mid-Atlantic, Northeast, North Central, California, South, and Midwest. There is also a category for those groups that consider investments anywhere in the country. In addition, there is ACE-Net (The Angel Capital Electronic Network) developed by the U.S. Small Business Administration‘s Office of Advocacy for those who can sell security interests in their company.

Again, the best bet is always to get a colleague, a lawyer or accountant to give you a personal introduction to a local group. At the very least you may make some new and interesting friends who are plugged into the local business world.

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