| When an entrepreneur says, "I need to go out and | | | | stage in the company's development. |
| get venture capital," what does that really mean? In | | | | Angels vary widely in their investment experience |
| one sense, 'venture capital' could be defined as any | | | | and their approach to working with companies they |
| type of financing for an early stage company. But | | | | invest in. Some invest only in companies related to |
| entrepreneurs who believe that they need to go out | | | | there area of expertise; in other words, an angel |
| and contact Venture Capital Firms for their capital | | | | who built and sold an enterprise software company |
| needs, can be starting down a long and frustrating | | | | would look for other enterprise software companies. |
| path. Many of these firms are not terribly interested | | | | In general, however, angels are willing to consider |
| in seed stage or pure start-up companies, preferring | | | | investments in a broad range of companies: high-tech, |
| to jump on board when the company has achieved a | | | | traditional or "old economy" companies, distribution, |
| certain number of milestones in product development | | | | manufacturing, service. |
| and securing customers for the product. And no | | | | From the entrepreneur's standpoint, there are two |
| amount of persuasion by the entrepreneur can get | | | | major difficulties with obtaining angel financing: how |
| the Venture Capital Firm's partners to deviate from | | | | to find the angels in their local community, and how |
| their investment focus. | | | | to handle the negotiations. Finding them is difficult |
| So who does assist the usually cash strapped | | | | because, in the past angel, investing has been done |
| start-up entrepreneur? | | | | on an extremely informal basis. The entrepreneur's |
| Wealthy individuals, often termed angel investors, are | | | | company was referred to the angel through a mutual |
| by far the most important source of equity capital | | | | friend or business acquaintance. And angels do not |
| for early-stage companies. Typically, these individuals | | | | seek publicity for their investment activities, for fear |
| have been successful entrepreneurs themselves, and | | | | they will be overwhelmed with entrepreneurs seeking |
| as such have a keen understanding of the trials and | | | | capital. There are no reliable directories of individual |
| tribulations of building a company. In the ideal | | | | angels as there are for venture capital firms. For the |
| situation, an angel investor, or a group of angels, can | | | | entrepreneur, this means that the best way to find |
| provide much more than financing for an | | | | angel investing is through diligent networking in their |
| entrepreneur: the angels can often bring | | | | local business community, attending events and |
| organizational, technical, marketing, and financial | | | | letting people know that the company is seeking |
| expertise. And of critical importance, the angels often | | | | financing. Contacting angel networks, and participating |
| have valuable contacts with potential customers, | | | | in angel online matching services are additional ways |
| vendors, and even sources of capital for the next | | | | to meet angel investors. |