We first heard the term "angel" in the early 1900's utilized to describe investors on Broadway who invested in theatrical productions. Today it identifies high value those who are "accredited" investors under the SEC rule 501 who purchase companies in early stage rounds of growth.
Angels are apt to have investable funds from million dollars or even more. Another criteria of these individuals is they earn a lot more than $200,000 per year to become qualified as an approved Investor. They would not only invest financially but may provide advice and assist with taking your business to the next level.
Within the last decade Angels happen to be favoring we now have sector but weren't limiting themselves simply to that one sector. Land Development as well as the Biotechnology areas happen to be consistent and in fact have experience growth within the last ten years with land or Asset backed ventures only seeing fluctuations with all the subprime property debacle.
With the Venture Capital Firms finding larger deals to buy a gap started to emerge for smaller funding niches that is consistently expanding and for that reason more angels happen to be emerging to the global scene. This combined with technology expansion in the Information Age it has made finding deals easier for Angels who're always trying to expand their deal flow.
Angels normally fall into four categories:
1. Guardian Angel
2. Professional Entrepreneur Angel
3. Operational Expertise Angel
4. Financial Return Angel
Guardian Angels are active investors that guide and coach the management team that you would have in place. Because Guardians invest a lot time into projects they have an inclination to battle a smaller number of deals (2-4 deals each year). For these investors the investment range is usually between $100,000-$150,000 per company plus the post deal phase they look to get a seat on your Board.
Professional Entrepreneur Angels are often the individuals who have more than money but industry background experience through starting similar businesses before. Yet what we should have found is because they explore other industries to invest in in line with the possibility of high returns.
These players have evolved into regular angels. These Angels tend to be patient investors because of the knowning that there are specific start up stages and milestones that have to be reached before results of success are apparent.
Operational Expertise Angels have served as senior executives within the chosen field that they focus their investment portfolio on. Fundamental essentials Angels that other Angels consult for advice on deal quality and homework. These are the basic Angels you would want to don your Board when it is time to go into the later stage of Equity Funding with Venture capitalist because they are seen as plus for the management roster.
Lastly would be the Financial Return Angels who have little entrepreneurial experience or industry experience. These are typically investors who made their cash through other fields like doctors and lawyers who are just searching out investments that may have preferred tax treatment with minimum involvement on their own part. Professional Investors often avoid deals that has to many Financial Return Angels because of the impatience and fear in market downturns. These Angels will be the least more likely to give you rigid conditions and terms like the institutional/professional investors would.