Angel Investor groups are organizations made up of individual accredited angel investors brought together under the purpose of creating efficient financing presentations, pooling investment funds, and learning from one another. Angel Groups saw a huge rise around the 1980s and 90s as the Internet bubble burst and helped to establish and bring together networks of private investors. Because many individual angel investors are not listed in local directories, angel groups are an easier way for entrepreneurs to get their foot in the door with angel investments.
Reasons for the Growth of Angel Groups
1. Time Efficiency: For both entrepreneurs and angels, an established angel group will provide the most efficient way of finding an investment relationship. This is due to the fact that entrepreneurs can present their business plans to many angels at once. For example, an entrepreneur can present to roughly 50 potential investors at once – much more effective than 50 individual presentations. It also allows for angels to hear multiple presentations within a day and be able to measure their options against a broad spectrum of choices.
2. Pooled Investments: As stated in our last blog, an average angel will invest $364,000 in a company, compared to a VC, which would give millions. Because of these monetary limitations, individual angels can collaborate and pool their funds into large VC-like business ventures when they are networked together within the same angel group. This would usually increase the amount of investment into the enterprise at hand as well as increase the power of the angels’ negotiation terms.
3. Due Diligence: By working together to conduct due diligence, angels research and validate financial and legal documents as well as marketing strategies presented by an entrepreneur from their established pool of experts in each field of study. A comprehensive background check allows members with expertise in various areas to assess the best investment strategies into an enterprise.
4. Social Benefits: Information flow and learning from one another is a large benefit of being involved in an angel group. These organizations often provide specific training services, group and committee meetings, as well as lectures and discussions that would broaden knowledge and enrich the investment experience for members. Finally, there is a large under-appreciated social benefit of surrounding yourself with people of similar interests – here, mentors can be found, business relationships jump-started, and friendships created.
1. Angel Capital Association (www.angelcapitalassociation.org)
2. Angel Resource Institute – formerly called the Angel Capital Education Foundation (http://www.angelresourceinstitute.org/)