Sage Advice US

When to seek angel investment

Building a business requires capital. You may be set with your own funds, or tapping into savings or credit, but another option for entrepreneurs is an angel investment.

What is angel investment? 

The term, “angel investor,” coined by Professor Bill Wetzel of the University of New Hampshire in 1978, to describe early-stage investors, has gained a lot of cache over the past two decades. Angels invest their own money in a business with the hope of accelerating or kick-starting growth and receiving a return. Research has found that angel-funded businesses succeed at a higher rate than those that have other financings, and angel investors fund more than 16 times as many companies as venture capitalists.

While it is difficult to track, according to a survey by the Center for Venture Research at the University of New Hampshire, the total U.S. angel market grew from $17.6 billion in 2009 to $24.1 billion in 2015, and the average investment that a business receives from an angel investor is $347,000.

There are various types of angel investors, and some are even accessible online.

  1. Individual angel investors who are personal contacts, friends, and former colleagues. 
  2. Online angel investors via accredited platforms such as AngelList, SeedInvest, and Portfolia.
  3. Angel groups like Pipeline Angels, 37 Angels, and Astia.

For entrepreneurs, the move to engage an investor is a serious one. It typically involves releasing some ownership stake, or a level of control in the direction of the company. On the plus side, a well-heeled and well-connected stakeholder might be just what the business needs to achieve additional success. In most situations, angels will integrate regulations into what the entrepreneur can do.

Consider these issues before working with an angel investor.

When to seek angel investment

Reasons to re-think outside investment

Taking on an investor is an important decision. Be sure to consult with your accountant, lawyer, financial planner and any existing partners in order to obtain their advice.