Angels are wealthy individuals who invest in startup companies. An angel investor must be an accredited investor to be able to purchase stock in a startup. According to a paper on angel investing by Robert Wiltbank of Willamette University, there was $22.5B in angel investing in 2004 compared to $20.5B in venture capital investments that year. The following findings from his study of 1,038 angel investments is useful information for entrepreneurs who are looking for seed-stage angel investors:
- 34% of the deals studied were done at the seed stage, vs. 2% for VCs
- 51 hours were spent in due diligence per investment, on average
- Investors averaged nearly 14 years of entrepreneurial experience
- Investors with a greater concentration of investments in seed stage deals source more deals through personal friends and also do significantly more due diligence prior to investing
- Nearly 2/3 of the investments studied resulted in negative returns
- Concentration in early stage investments was significantly related to fewer failures
- The estimated cash multiple is 2.9 with a holding period of 5.7 years for successful investments
- A focus on control (efforts to deliberately construct market elements) rather than prediction (efforts to position for success based on forecasts) significantly reduces losses.
Angel Groups
Some angels invest individually and are not a member of a group, but many angels are members of angel investment groups who work together to evaluate startup investments. Some angel groups pool their money and make investment from that pool (the Oregon Angel Fund is an example). Other angel groups (such as the Portland Angel Network) cooperate in doing due diligence, but each angel makes an independent decision on investing in each startup that presents to the group.
For a listing of angel groups see OregonStartups.com.
Finding Angels
Angel groups are easy to find. Just check OregonStartups.com for a list of angel groups in the Northwest. Individual angels are harder to find. It comes down to networking. Talk to other companies that have received angel investment and ask for introductions to their angels. Once you start to meet some angels, they can introduce you to other angels.
Networking events such as the OEN Pub Talk events are worth attending also. And events such as Angel Oregon. And organizations like OTBC can help as can other networking groups.