Business Planning, Business Plans and Venture Funding

- Angel Investing -

Angel investing is generally considered the entry-level of funding for entrepreneurs and their ideas and/or start-up companies. Historically, “angels” have been defined as high net worth individuals that have an interest in using their resources to fund and grow start-up companies. Generally speaking, many of these same high net worth individuals have been through the entrepreneur start-up process with some level of success and would like to use their experience and personal resources to facilitate individuals with the same type of interest in developing a company from scratch and to later see it become successful in the marketplace.

As of the year 2006, there was an estimated population of 234,000 individual angel investors in the United States. These same angel investors take a prominent role in early-stage investing. Each year, angel investors invest $20B to $30B in early-stage companies, funding approximately 30 to 40 times the number of start-up firms as that of venture capital firms.

Within the last 10 to 15 years, instead of investing as individuals, angel investors have become syndicated groups of investors, or angel groups, through legal partnerships that use the collective financial resources and experience of many high net worth individuals to fund entrepreneurs and their start-up companies. Angel groups typically require annual dues of $1,000 to $5,000 to support their operations. These groups work together to facilitate deal flow, screening, presentations, and follow-up, as well as due diligence and start-up evaluations. To become a member of an angel group, one must be invited to participate.

Today, typical angel groups fund start-ups requiring less than $25,000 to as much as $1.5M to $2.0M in funding.

The individual angel or angel group’s investment is considered an “educated” or “sophisticated” financial investment. As such, angel investors require an expected financial return on their investment. Accordingly, before considering investment in your start-up firm, angel investors expect the entrepreneur to have a business plan with complete, industry-standard financials to review for their due diligence process.

These same angel investors generally work very closely with the venture capital community. As such, angel investors often have the ability to rapidly secure follow-on funding from their venture sources as the company and their technology, product, or service offering develops and facilitates such follow-on financing.

Today, in North America, there exist over 300 angel groups, with 12,000 members. These angel groups reside in many of the 50 states of the United States as well as Canada. As expected, California has the most angel investment organizations. For the most complete listing of the angel investment organizations by region and then by state, as well as Canada, refer to the Angel Capital Association Directory at www.angelcapitalassociation.org/dir.

It should be noted that this is not a complete listing of all of the angel investment organizations, but it does list most of the organizations in the United States and Canada. One can also refer to other Web sites for additional angel investment organizations including Gaebler Ventures – Resources for Entrepreneurs www.Gaebler.com/angel-investors-networks.