Resources for Business Capital Part 2 : Angel Investors

Resources for Business Capital Part 2 : Angel Investors

In this second part of a three-part series on “Resources for Business Capital” I will be discussing the role of Angels as investors in your business. I will discuss who they are, why you should consider them, and also provide links to angel investor databases and private sites. If you haven’t read the first part of the series, Business Plan Development – Resources for Business Capital: Small Business Grants, than you might want to read that first and investigate any opportunities you might have in regards to receiving grants before seeking out an Angel. Otherwise let’s get to the subject at hand.

Angel investors are private investors who are prosperous individuals, one way or another, who are looking to invest in new or existing entrepreneurial start-ups. They tend to be looked at more favorably by entrepreneurs than VC’s because they do not have stringent requirements that conventional Venture Capitalists are constrained by. Some of them are motivated in what they do for personal satisfaction as opposed to strictly being bean-counters.

Important contrasts between Venture Capitalists and Angel investors should be noted given the nature of the topic to assist you in deciding upon which is the more preferential investor-type in your endeavor to raise business capital. Rhonda Abrams in her book Successful Business Plan: Secrets & Strategies has broken it down quite nicely and therefore I will use her thoughts on their contrasting positions.

The investment criteria for an angel investor and venture capitalist are somewhat similar. They both require a company with growth but venture capitalists are looking for extreme growth.

The source of investment funds differ greatly between the two kinds of investors. Angels generally provide their own private assets whereas VC’s use other people’s money, i.e. institutional funds.

Angels are looking to invest anywhere from $25,000 to $2,000,000 whereas VC’s are looking at funding companies for no less than $2,000,000 dollars.

Expected return between the two investor’s shows to be almost identical, three-to-ten times a return on investment for Angel’s versus five-to-ten times expected return for VC’s.

Angel’s generally will start funding an entrepreneurial venture at the seed, start-up, and early stages whereas VC’s will invest in the start-up stage as well as any expansion stages.

Angel’s generally bring hands-on expertise as well as early funding but VC’s bring a lot more; large amounts of money, team-building, and industry-specific strengths.

The extent of due diligence brought about by the two groups is also significantly different; angels provide some to significant amounts while their counterparts provide significant to a huge amount.

Are you likely to be replaced as CEO between the two? Angel investors are less likely to whereas VC’s are more likely to replace you, the founder.

The other key difference Rhonda Abram’s states are in the number of deals each of them is likely to make per year. Angel’s typically do one to three deals per year whereas VC’s fund fifteen to eighteen per year per VC fund.

Obviously there are some key differences between the two kinds of investor’s. Angels are more likely give you more freedom, allow you to maintain control, and require less return but they may have less resources financially and networking wise. VC’s are likely to have more to give and require more in return, in all aspects of assistance you receive from them.
The biggest difference that I think that may or may not be obvious is that is sounds like you are more likely to have a better chance in selling your idea to an Angel than a VC if you have excellent salesmanship skills. If you have a clear vision of your company and can invigorate the Angel with that vision that may be half the battle besides having a well-developed overall plan.

The criteria that each are generally bounded by is laid out here and it is up to you in deciding what you require and are willing to give up for your business capital needs. I have written about Angel’s first because I think when it comes down to it they have the biggest upside when it comes down to one factor, control. For someone like me remaining in control is paramount to any investment options I have to choose from. After all who has a better vision for the future of my company than me?

Now I want to spend some time providing two links (for now) to databases I have found in my search for Angel investors.

I have to say how impressed I am with the Center for Business Planning’s website. They have an extensive range of information on writing business plans, marketing plans, coaching, products, services, and support. I was able to find a well-detailed and extensive list of over 300 business investment firms. This alone is like a one-stop shop for finding and targeting investors. When you first go on the site you can narrow your search by type of investor (Angel or VC), and their funding stage (Seed, early, mid, late, and merger). Not only can you narrow down your selection they give you the name, address, area served, and a link to their website as well as the industries they focus on and information about their funding stages and capital investment range. This is definitely a page worth bookmarking.

Another website I was able to track down was vFinance.com. They have this one particular place on their site that you can search for Angel investors using their AngelSearch engine. AngelSearch “combs government records to gather investment data, industry preferences, and total stock positions of America’s wealthiest individuals.” The only catch is they charge you depending on how you utilize their search engine. Here is their pricing menu. I have also included a link to what a sample search result would look like. I like that you can search by individual, industry, subsector, state, and zip amongst other things. If you got the extra dough this may be the way to go in your search for capital.

I also want to point out another website I was able to find called StybelPeabody.com. I was able to find a page on their site called “Questions board members should ask about Angel financing strategies”. It has an interesting discussion about when Angels are best utilized, who they are, what they do, but most importantly ways to structure a deal with them! Definitely glad I came across that page.

Before I wrap things up I want to point to another site that I stumbled upon earlier but haven’t had much time to investigate yet. It’s called Entrepreneurship.org. I found them through SCORE’s website, an SBA counseling group. I will update this blog later once I have uncovered more information on it. If you find anything on there worth linking to shoot me an email.

Well that about wraps up this article for the time being. As I have stated in previous articles I welcome your comments on new information you may come across that will help make this article better. Your feedback is most appreciated whether it is new information about other sites and organizations I haven’t listed here or information regarding sites and links I am currently listing in this article. Also if you have any positive or negative experiences you’d like to share after using any of the particular databases or Angel’s found through this article please share them with my other readers.

I hope you have found this article useful and if you like my site or these articles please share it with the world through Facebook, Twitter, and/or any other social media outlet you may use. Take care and stay tuned for the next blog post on “Business Plan Development – Resources for Business Capital: Venture Capitalist’s”.

1 Comment

  1. This was very informative. I like seeing the comparison cause it does help me say what is best for my business and what I want to achieve by borrowing from VC vs. Angel. Doing your research you see the benefits of both but you really don’t get to look at it objectively because on your mind your thinking how much do I need and how much growth I can get to get their money back. Control is a big deal for me or why do this? Well that is my feelings on this, I can just work for a company already establish if I didn’t want my vision to be carried out. Thanks I Love It! I will definitely Network you around.