Private Equity Solutions

Looking For An Angel -- Investor That Is:
Know What YouÆre Looking For.
By Dee Power copyright 2003

Entrepreneurs always need additional capital for their company.
Friends and family have already contributed, the company doesn't
qualify for traditional bank loans, and venture capitalists
aren't interested. So what can an entrepreneur do? Look
for an angel investor.

Angel investors are private individuals who invest their own
money. In contrast venture capitalists invest money they have
raised from financial institutions and wealthy individuals.

Angel investors fund more companies at an earlier stage with
more dollars than any other kind of capital. According to
the New Hampshire University Center for Venture Research, nearly
two thirds of funding for new enterprises comes from private
investors and there are almost 3 million people in the United
States that have made an investment in a private company.
Compare that to only 1000 active venture capital firms. VCs
also invest nearly all their funds (75%-80%) in
established companies, not start-ups or early stage.

Looking for an angel investor? Know what to look for.
50 angel investors around the country were surveyed.

* Angels are middle aged. The average age of the respondents
was 49. The youngest angel was 25. No angel admitted to
being older than 75

* They invest less than $100,000 in any one company at a given
time. The average amount invested by the individual angel is
$72,000. The range most often given was between $20,000 to
$35,000 with the highest range of $250,000 to $500,000.

* Angels are highly educated. 75% had graduate degrees, an
additional 17% had graduated from college and 4% had at
least attended college.

* They are experienced in investing. 78% of the angels had more
than five years of experience investing in private companies,
11% had less than 1 year, and 11% had from 3 to 4 year's
experience.

* The great majority of angels are male. Only 10% of the angels
were women.

Nearly all angel investors are accredited, which as defined by the
Securities and Exchange Commission means that the individual has
an income of at least $200,000 per year or has a net worth that
exceeds $1,000,000 not including the value of their residence.

Angel investors are interested in a wide range of industries
although the most interest is still generated from high tech and
bio tech companies.

Angels invest for a number of reasons, and one of those reasons is
to get a handsome return on their money. Angels expect a 34%
annual return on their investment. Angel money is not free money,
it is not a grant, and it is not charity or an entitlement. Many
entrepreneurs are surprised to find out that angels have the same
expectations as venture capitalists.

Most of the investments made by angels are close to where they live,
so it makes sense for entrepreneurs to look in their own backyard
first. It is unlikely that an angel who lives in Los Angeles will
invest in a company located in Des Moines. Angels tend to be
involved in their portfolio companies and that is more difficult
when the company is located hundreds of miles away.

When looking for angel investors, one of the most important
factors for the entrepreneur to keep in mind, is --that
angels are individuals. While we can compile statistics from
surveys and interviews to get a composite angel, angels are a
diverse group of individuals. You could be sitting next to one
right now, and not even know it.

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The angel survey was completed by Dee Power and Brian Hill,
authors of "Attracting Capital from Angels: How Their Money
and Their Experience Can Help You Build a Successful Company,"
2002 and "Inside Secrets To Venture Capital," 2001. They can
be reached through the company's web site
http://www.capital-connection.com
mailto:business@...
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