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Jul 3
An Angel Investor is Not
I went to an angel event last week and, to make a long story short, discovered that many of the entrepreneurs in attendance had a basic misunderstanding of what an angel investor is.

Here are a few things an angel investor generally is not (or should not be):

A friend or family member -- An angel investor is not your rich uncle who will float you a loan to get your business started because he remembers how cute you were on your AYSO soccer team when you were 10.  Angel investors are professionals who want to see solid evidence that they will get a big return on their investments -- no matter how cute you were when you were ten.
 
A venture capital firm -- Angel groups may be able to produce the occasional $2 million investment, but independent investors are generally in the $50K to $250K.  If you need more than $2 million, go the VC route or grow internally.

A silent investor -- The majority of angels want to get involved with your business on an advisory level.  If you're smart, you'll take advantage of their expertise.

A sucker -- I heard an entrepreneur "guarantee" a 100% return on investment, plus ten percent in cash, plus a large equity stake.  I've never seen angels tune out of a pitch more quickly.  Don't ever "guarantee" an angel a return on his/her investment.  You can't guarantee anything more than the fact that you will spend their money.  Promising anything more just makes you look naive and/or indicates that you think they are stupid..

As with most rules, there are exceptions to these ones, but if you are looking for a VC firm, a sucker, a friend, or a silent investor, angel money isn't the way to go.

What else isn't an angel investor?

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« No Such Thing as Best Practices? | Main | Freedom and Angel Investing »

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