Techno Finance and Executive Diary...

Tuesday, February 17, 2009

What is An Angel Investor?

Although large venture capitalists look for bigger and bigger investments to make and for companies with the ability to grow to $100 million in sales in five to seven years, high net worth individuals or small group investors, commonly called "Angels," account for more capital invested in small companies than all of the venture capital funds combined. The amount of money Angels want to invest and the terms (expected return on investment, exit strategy, and their interest to participate in running the company) varies with each individual.

According to the Colorado Capital Alliance, surveys of angel investors show that:

Angels are seeking companies with high growth potential, proven management and sufficient information about the company, its management team, and its market to be able to assess a company's value

On average, Angels expect 10 to 15 percent above of the S&P 500 return on equity

Typically, Angels invest in companies seeking between $50,000 and $1,000,000

Angels generally prefer to finance manufacturing or product-oriented ventures, especially in the high-tech fields

On average, Angels are 47 years old, have a postgraduate degree, and management experience in an entrepreneurial venture

Much of an Angel's value of their involvement is their business experience and willingness to assist growing the business. Make no mistake though, they are looking for a return on their investment as well.

Before you approach any Angel or other investor, you need to develop a comprehensive business plan PDF (177 KB - 31 pages) and set of Financial projection (208 KB - XLS). Also, when accepting capital from Angels, there are some legal issues you be know. Any sale of stock must comply with federal and state securities laws. Such laws were created to assure that buyers are fully informed of a company's situation. Entrepreneurs and their teams must be forthcoming with information that investors need to properly assess the business.

Much of the information is normally contained in the business plan or in a more legal description, the Private Placement Memorandum. Much of the legal guidelines for making such investments fall under the Securities and Exchange Commission's Regulation D, Rules 504-506. It is important to know that the rules can hamper additional fund raising during the subsequent 12 months.

source:
KEY- Venture Capital

Labels: Venture capital

Posted by "CPerformance" :: 11:09 AM :: 0 comments