Introduction to Angel Investing
In 2009, over 250,000 wealthy individual investors – often known as angels - contributed $17
billion in start-up capital to help fund almost 60,000 early-stage businesses, according to the
Center for Venture Research at the University of New Hampshire. These early-stage angel
investments help drive job growth and technological innovation across a wide range of industries,
in New York City and throughout the U.S.

I recently moderated a panel discussion, hosted the Financial Women’s Association
(www.fwa.org), on “An Introduction to Angel Investing.” Panelists included Peggy Wallace and
Nancy Pedot, both investors and members of angel group Golden Seeds; entrepreneur Larry
Goldfarb, founder of SaaS-based software company Compliance 11; and Aliza Freud, founder
and CEO of SheSpeaks, a technology company that builds user communities that provide insight
and feedback for national consumer brands.  

The panelists’ insights into angel investing included:

  • Understand the differences between angel investors and venture capitalists.
    While both angels and VCs are interested in providing funding to help companies grow,
    angels generally make investments in the range of $350,000 to $1 million, whereas
    venture capital firms often make significantly larger investments. Angels generally invest
    their own funds, while venture capitalists raise funds from investors. Bear in mind that both
    angels and VCs usually want to see some proven ability to acquire customers and
    generate revenue - funding a pre-revenue company can be very challenging.

  • Know what angels look for in an investment. Angel investors generally look at both
    the business model and the experience and characteristics of the founding entrepreneurs.
    An ideal combination for many angel investors is a businesses with potential to scale
    quickly, which is run by an entrepreneur who can demonstrate flexibility, willingness to
    accept feedback, and in-depth knowledge of their industry.

  • Prepare before you pitch. Bear in mind that angel investors or angel groups often
    speak with hundreds of entrepreneurs before investing in just one company. You’ll have
    just one chance to make a positive impression. If you are considering seeking angel
    investors to help build your business, the panelists suggest preparing a short PowerPoint
    overview, backed up by a detailed business plan. Be prepared to present the company in
    a few succinct sentences, to be followed by an in-depth discussion of your business and
    growth opportunities, if the initial pitch generates interest.

  • Be ready for an ongoing relationship with your investors. Investors generally don’t
    hand over a large check and disappear. Successfully raising capital from angel investors is
    only the first stage in an entrepreneur’s relationship with an investor or group of investors.
    If you are able to obtain angel financing, you can expect to spend a significant amount of
    time keeping your investors up-to-date and informed on the ongoing developments within
    your company. An angel investor may also require one or two seats on your board of
    directors.

For more information on angel investing and a list of angel groups in the New York area, visit
www.angelcapitalassociation.org.
Hughes Klaiber LLC | 28 West 44th Street, Suite 1600, New York, NY 10036 | Tel 646-654-0458
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