Who are Business Angels?
The term “Angel” was coined within the Broadway theater, where wealthy individuals made donations to theatrical productions. As soon as the production brought significant income, the investments were fully returned, with interest. In 1978, the term “Angel” was officially introduced by the founder of the Center for Venture Studies, William Wetzel, completing his research on how entrepreneurs attracted business capital. He used the term to describe investors who supported newer businesses with initial capital. Presumably, when Wetzel coined the term, he was thinking of imaginary redemption of entrepreneurs by Angels and saving their businesses from corporate death by writing out a check.
Business angels are willing to invest in startups that may find it difficult to find sources of funding elsewhere. Such investments are associated with high risks: not every startup makes a profit before it becomes successful. These Angels are particularly interested in investing in a startup founder, paying less attention to current profits or sales that are often modest early on. They also consider the size of the market, the product, the competition, and early sales traction. Their mission is not only professional investment in potentially profitable projects, but also mentoring, guidance, and coordination of promising projects. Angel investors receive few promises or guarantees, so they mostly rely on their experience, intuition, and knowledge of financial transactions.
Today, business angels include experienced business people, managers of large corporations, and people with significant accomplishments in their careers. They support a new startup by investing their own money, usually in exchange for a stake in the company. Angel investors serve as an important link between a startup’s initial financial needs and the need for capital in the future. The activities of business angels are comparable to venture capital investing, however venture capitalists invest in companies at later stages of their life and don’t usually use personal funds.
Sources of Angel Investment
The most common sources of angel investment are angel syndicates and individual investors. Angel investors mostly participate in the second round of funding, after an entrepreneur raises funds from family and friends. Funds received from angel investors can range from several thousand to several million dollars, depending on the type of business. Leading industries where angel investors invest include: technology, healthcare, software, biotechnology and energy. In the U.S., people investing in startups can be both accredited investors (with a minimum net worth of $1 million) and unaccredited investors.
Where to Find Business Angels
Business angels can be found on special platforms that have lists of investors with a good reputation, who are open to investing in startups. It is also recommended to follow angel investment conferences where you can meet with potential investors. Moreover, there is an opportunity to find angels through referrals, local lawyers, and associations, such as the Chamber of Commerce. Business angels have valuable experience and sometimes play an active role in business management. They use their entrepreneurial skills, experience, and networks to help young entrepreneurs start their businesses. They are motivated by the persistence of young entrepreneurs who want to succeed, and as a long-term goal, the development of invested projects and the growth of their value. Angels receive their income mainly from the sale of their stake in the company after its business success.
Online Platforms Where You Can Find Business Angels
AngelList – a platform created in 2010 for startups, angel investors, and people who want to find work in startups. The platform allows entrepreneurs to raise funds from angel investors for free. Their mission is to democratize the investment process and help companies with problems in attracting investment and finding personnel.
FundersClub – an online venture capital platform founded in 2012 in the United States. Focuses on seed and early stages of investments, allowing accredited investors to become shareholders of managed venture capital funds that invest in pre-selected private companies. Members of the community can make small investments (totalling $3-$5 thousand) in companies of their choice. FundersClub aggregates individual investments into one fund and transfers it to the startups under its own name.
500 Startups – a well-known American venture capital fund and startup accelerator founded in 2010 by entrepreneurs Dave McClure and Christine Tsai. The team consists of 150 people based in 20 countries, managing venture investments in 74 countries. In addition to investing, they are passionate about creating viable startup ecosystems around the world and hosting educational programs, events, and conferences.
Keiretsu Forum – a global network of angel investors based in San Francisco founded by Randy Williams in 2000, with more than 2,500 accredited members on 3 continents. Forum participants take part in social and charitable activities.
TechStars – a global platform for investors, corporations, and entrepreneurial innovation. The American accelerator for early-stage startups was founded in 2006 in Boulder, Colorado. As of 2019, the accelerator has accepted more than 1,600 companies into its programs with a combined market capitalization of $18.2 billion. Note that TechStars accepts less than 1% of applicants.
Y-Combinator – the American Seed Accelerator began its work in 2005. More than 2,000 companies, including Stripe, Airbnb, Cruise Automation, DoorDash, Coinbase, Instacart, Dropbox and Twitch, benefited from it. Y Combinator invests $150,000 in a large number of startups twice a year. After three months of intensive work, a demonstration is held for the invited investor audience.
Angel Capital Association – the North American Professional Association of Active Accredited Investors, numbering 14 thousand angels and 250 angel groups. Since its founding in 2004, it has played a significant role in uniting individual angels and venture capitalists. The association helps them expand their networks, practice, and innovate. The ACA, which grew out of four angel organizing summits convened by the Jung Marion Kauffman Foundation, sponsors an annual Summit held in different cities where angel alliance leaders, governments, scientists, and venture capitalists share practices and discuss new ideas.
Funded.com – the global funding platform has received numerous recognitions for its dedication to supporting startups and existing businesses.
Gust – a global SaaS platform for creating, operating, and investing in large-scale, fast-growing companies. Gust’s online tools help entrepreneurs start, run, and raise funds for companies, while providing transaction flow and investor relationship management.
Platforms Targeting Female Entrepreneurs
Astia – a $100 million accelerator and investment fund established in 1999. It specializes in supporting companies in Seed and Series A rounds, and is interested in rapidly growing industries such as bio and environmental technology. However, at least one woman must be among the startup founders to participate in the program.
Broadway Angels – a group of female investors specializing in small investments in the IT sector. All participants are or have been general partners of top-level venture companies or top managers of leading technology companies.
Pipeline Fellowship – a “training camp” of angel investors. The community promotes diversity and integration of female entrepreneurs.
SpringBoard – a central web-hub of influencers, investors, and innovators that helps women build successful businesses.
37 Angels – a syndicate of business angels, founded in 2012 by businesswoman Angela Lee. Initially, there were 37 founders, but now there are more of them. Women invest in startups of early stages, and make an average investment of $50 thousand to $150,000.
Golden Seeds – a New York-based network of investors supporting companies started by women, primarily in the consumer goods, technology, and software sectors.
Regional Platforms in the U.S.
San Francisco Bay (The Bay Area)
Band of Angels – a group of Hi-tech directors of businesses based in Menlo Park, California. The group supports the financing and mentoring of high-tech companies in their early stages.
Investors’ Circle – a large and active early investing network. Over 200 angels from San Francisco have already invested nearly $200 million in more than 300 businesses related to urban development, education, health care, and personal development.
Sandhill Angels – a group of successful Silicon Valley executives and investors, with a passion for commercializing cutting-edge technology.
Pacific Northwest (Seattle, Portland, etc.)
Alliance of Angels – an active group of 140 business angels in the Pacific Northwest, based in Seattle, Washington. As an alliance of budding investors in startups, this community provides entrepreneurs with financing, intangible resources, and education. Each year they invest $10 million in 20 companies.
Seattle Angel Conference – takes place twice a year and looks for companies in a very early stage, with up to 50 employees. The conference begins with a series of workshops to find new investors and startups, creating a 50/50 balance between new and previous investors, each investing $5,500 to create a $150,000-$200,000 fund.
West (Los Angeles, Las Vegas, etc.)
Pasadena Angels – more than 100 angel investors from Altadena (a high-end community in Los Angeles); invest up to $750,000 in ideas and startups.
Tech Coast Angels – has been operating since 1997 and has 300 angels from Los Angeles supporting entrepreneurs in the fields of technology, biotechnology, consumer goods manufacturing, media, urban environment development, and internet projects.
South – East
Atlanta Technology Angels – supports businesses that have shown high growth rates at an early stage.
Southwest (Texas, etc.)
Central Texas Angels – a new group of micro-investors that has already invested $62 million in 100+ startups and has ranked among the top 5 most active angel investor groups in the United States. Based in Austin, Texas.
Desert Angels – a micro-investor group based in Tucson, Arizona, with accredited investors looking for opportunities to invest in start-ups or companies in early stages. The organization has 85 members who invest their personal funds.
Northeast (New York, Boston, etc.)
New York Angels – a community of more than 100 entrepreneurs, venture capitalists, and other New York business leaders who invest between $250,000 and $750,00 into start-ups in the field of technology and new media at an early stage.
Launchpad – a community from Boston, Massachusetts, whose participants prefer to invest in ideas at a very early stage. Launchpad is among the top most active angel communities.
Maine Angels – a private equity network that helps entrepreneurs by investing in and mentoring early-stage companies, primarily in New England.
Midwest (Chicago, etc.)
Hyde Park Angel Network – a Chicago forum where micro-investors communicate. Newcomers are set to invest in Seed and Series A small business startups primarily located in the Midwest.
North Coast Angel Fund – Cleveland Society in Ohio investing in tech startups.
Ohio TechAngel Funds – a group of nearly 300 angels based in Columbus, Ohio. They support startups in the fields of IT, new materials, and advanced medical technology.
Startups.com – the platform helps more than a million startup companies find customers, financing, mentors, and education. Startups.com consists of five products: Startups.com, Clarity, Fundable, Launchrock and Zirtual.
Regional Platforms in Europe
European Startup Network – a European startup network (based in Brussels, Belgium) uniting 22 European national startup associations. They aim to support the successful growth and development of startups in the EU, data analysis, facilitating access to international and European markets, and creating a powerful national startup ecosystem.
European Super Angels Club – connects startups with partner venture capital funds and leading corporations throughout Europe. The club is based in Vienna, Austria and primarily invests in information technology and the software industry.
European Business Angel Network (EBAN) – a pan-European community of early stage investors, which today unites more than 150 member organizations in more than 50 countries. It was established in 1999 by a group of networks of angels in Europe with the cooperation of the European Commission and EURADA. EBAN represents a sector that is estimated to invest €11.4bn a year and plays a vital role in Europe’s future, particularly in funding SMEs (small or medium-sized businesses that meet certain restrictions on workers or financial dimensions).
Insurtech Gateway – an accelerator for insurance technology, supported by Hambro Perks. Founders can get insurance, investment capital, and tips on building their startup. The Foundation supports startups after incubation to Series A and beyond.
Regional Platforms in Ukraine
Lviv Tech Angels – a community of investors, founded by Lviv IT cluster and first presented in June 2019 at the IT Jazz business conference. The community brings together top managers and co-founders of local IT companies that have already invested in Ukrainian startups at an early stage.
Startup Network – a platform for entrepreneurs who want to work on their startup, find business angels, seed funds, and venture capital funds. With the help of this platform, they can also sell a business profitably and quickly, while creating a business plan or other documentation that is necessary when communicating with a potential investor.
Association “Private Investors of Ukraine” – an association of private and corporate investors in various regions of Ukraine – a full member of the European Business Angel Network (EBAN). The Association of Private Investors of Ukraine is not an intermediary between investors and entrepreneurs, but unites like-minded people who are ready to become investors. For its members, it conducts individual presentations of investment projects, as well as public events at which entrepreneurs present their projects to investors.
UANGEL – a Ukrainian angel platform for pitching presentations usually used at an early stage of startup development. UANGEL is a member of EBAN and a partner of GUST.
One of the advantages for startups working with business angels is that angels are more willing to take risks than banks, allowing the founder to take on less risk. Angel investments generally do not have to be returned if a startup fails. The success of the projects is facilitated by the joint work of angel investors and founders. In addition to financing, business angels can recommend employees, bring unique insights to the startup, share contacts, and provide useful commercial skills.