Angel investment is a distinct *source* of capital that it’s important to distinguish from “seed money,” funding from angel groups, venture capital, money from an incubator, or even an early investment from someone with later stage expectations.
In my time in Silicon Valley, with New York, and in Texas, what is glaringly obvious is that the lack of distinction of Angel Investor is cause for misalignment, inefficiency, and founder headaches as they endeavor unsuccessfully to raise that early capital.
They’re called Angels for a reason and let’s be clear, that title, and those wings, don’t just define someone who funds your early startup – an “Angel” is on your shoulder, helping out, making a sacrifice of their own out of love for you and what you’re doing, and in the process of much more than funding, they give your startup wings.
And prompting my sharing these thoughts is that not a day goes by where I don’t meet a founder who thinks they are fundable by Angel Investors (and they’re not) OR someone referred to (or referring to themselves) as an Angel Investor is really just a business investor… not really knowing your space, and expecting revenue and customers at your earliest stage. I was just pinged with this question: What problems/struggles do angel investors commonly face?
In the interest of that consideration, rather than focusing on the challenges of the startup founder raising seed money, let’s talk about the challenges Angel Investors face; what makes it harder for them to do their job of supporting the highest risk stage of innovation and entrepreneurship??
Three Key Challenges that Hinder Angel Investors
- Bad advice
Angel Investors are not VCs. Angel Investors are not business investors. Angel Investors are not Angel Groups nor crowdfunding.
If you are seeking, talking with, or getting indeed by an Angel, they have an incredible amount of disposable wealth, experience in your industry, and a portfolio of startup investments. Writing a check to a startup does not directly an Angel Investor make.
Mis-perception of the word “Angel” drives bad advice and poor connections.
Investing at a seed stage (when Angel Investors invest) means an average 7–10 year term until a return on investment.
Many can’t or won’t wait that long.
7–10 years. Average (not, at most).
Startup communities are fraught with people offering “startup” advice so as to pad their resume, feel like they’re contributing, sell their services, and more. Watch for this, my point isn’t a harsh judgement of anyone doing it; it’s that you need to be conscientious of the experience, goals, and perspective of the advice you’re getting.
Startups are not your average new business. Entrepreneurs and founders develop NEW markets and innovations.
Much of what new *businesses* might spend their time on, startups should not, as an existing business type/model certainly can learn from the advice and experience of other like-businesses. Startups, breaking conventions, serve “Angel Investors” for a reason – they’re doing something new and uncertain; typical new business advice may not apply, and can certainly mislead.
As you venture forth seeking Angel Investment, be clear about what that really means, how to discern Angel Investors from other sources of capital, with their different experiences and expectations, and work to make it easy to meet Angels on their terms, so they can best meet and support yours.