I would add one category to VCE's list: The Pretender Angel.
Pretender Angels (cousins to the Tire-kicker angels) don't have the passion for entrepreneurship that other angels have. Their version of angel investing consists of finding entrepreneurs who are weak in experience and likelihood of success, but strong in collateral. They use the guise of "angel investing" to do hard money loans and other forms of "investing" that are often extremely poor options for the desperate entrepreneur.
Are hard money loans and othe types of debt all bad? Of course not. For many young companies debt is often the best option.
But lending is not angel investing. Those who use the title of "angel investor" to attract deals are just Pretenders.
Just to clarify your last statement: early stage angel investments sometimes take the form of a CONVERTIBLE debt instrument - which provides flexibility and costs almost nothing in legal fees. Because it is convertilble to the next round of financing, that form of lending is totally OK.
Posted by: Jeff Clavier | July 8, 2006 12:22 PM | Permalink to Comment