Over the past two years at Angelsoft I've seen a lot of confusion from entrepreneurs, service providers, and even VCs, about what or who an angel investor is. This confusion causes problems in the investment/fund raising process process because knowing your customer/audience is half the battle, so I wanted to take a second to help clear some things up and hopefully kick off a productive discussion! My over simplified definition of an Angel:
"An individual investor investing their money in early stage companies".
Its critical to understand that this definition is broad, and a lot of different types of people fall under the definition of "angel"!! They could be successful entrepreneurs looking to invest in the next generation of entrepreneurs or they could be successful executives looking to get their hands dirty with small startups and higher risk investments. They could just as well be family members that unintentionally become angels by providing seed money to son/daugther entrepreneur, or they could be self proclaimed lone wolf angels investing big on their own and actively seeking deal flow. Recently I've found two great posts on the topic. Todd Vernon, CEO of Lijit, wrote a very well structured post with the goal of entrepreneur setting expectations. He says:
Many young startup entrepreneurs tend to look at Angel Investors as a group of people with more money than sense (which sometimes is true) but generally not. They give no thought to the motivations of their Angels, what their Angels should get from the relationship, or simply why the Angel should be interested in investing. Like anything, understanding your audience is half the battle.
He goes on to propose a series of different angel types including The Family Investor, The Relationship Investor, The Idea Investor, The Once removed investor, and the Arc Angel.
Roger Ehrenburg at Information Arbitrage focuses on the Arc Angel or Super Angel profile here. He goes so far as to say that he thinks this new breed of angel is better equipped to deal with seed stage deals than any VCs. There is definitely some cross over here with Roger's definition of a Super Angel, and Todd's Arc Angel. I'll profile the type of person we call a "deal lead" in a future post.
Please contribute, and let me know how you think of angels, and what all the different profiles might be.