Why are Angel Investors a growing catagory in Private Equity?
I believe that traditional Venture Firms are competing more and more with Angel Investors and that Angels are helping start-ups receive investmentswith better terms. Why is this? Below I list my top XX reasons:
- Organization & Resources: Angels are better organized and have access to resources previously only available to VC firms. They have tools like Angel Soft and information more publically available on the internet.
- Deal Flow: Because Angels are better organized they share deals and see more deal flow than in the past. They are also known to have less preditory terms – does “Full Rachet” ring any bells. Also there is a sense (neither right or wrong) on the part of the entrepreneur that Angels like their name are more trust worthy. These factors add up to deal flow.
- Lower Capital Requirements: Let’s face it many businesses need less money to get started and once they are started the same businesses become breakeven or cash neutral quicker. A recent review of my company’s budget reveiled such a low capital budget that I almost dismissed the whole as inconsequential. Smart start ups are using shared resources (Amazon for bandwidth, work from home (Starbucks) employees and outsourced everything to get started and only bring things or people on board as they have the cash to pay for them.
- Sophistication of Angels: Angels are smarter (for the most part) about how to get a deal done. There are real professionals who have made their money and are now operating their “mini-funds” instead of buying into a fund so that they can have more control over their investments. I call them retired Angels and I know several. They are sharp people who could easily work in a venture fund but instead have “fun” doing their own deals. To these people I say, “Bravo!”
If you are looking for money – even if it is three to five million try the Angel side of the tracks first. There are a lot of Angels out there looking for you. Remember – Good Deals always get funded!