Growthink Blog

What Angel Investors Look For: Facts Vs. Truths

Print
Categories:

The Center for Venture Research at the University of New Hampshire just released its report on angel funding activity for the first half of 2011. 

And the news is....good! 

During the first half of this year, angel investments totaled $8.9 billion, an increase of 4.7 percent over the same period in 2010.  

What does this mean in terms of number of companies funded by angels, and the number of angel investors?  

Well, the study estimated that 26,300 entrepreneurs received angel funding during the first half of 2011. And the number of angel investors who funded these companies: a whopping 124,900 individuals.  

Before continuing on with statistics from the study, allow me stop here for a minute. 124,900 angel investors wrote checks to entrepreneurs like you over the past six months. That's a lot of investors. Two things should be going through your mind right now. First, you should be thinking that that's a huge number of angel investors. Second you should be thinking that with such a huge number, there must be an angel investor (or two, or three, etc.) out there who would fund your venture (which there are).   

I'm also hoping you realize that no person, firm, corporation, etc. has a list of these 124,900 angel investors. Such a list doesn't exist. Because these 124,900 angel investors who funded companies in the first half of 2011 is going to be mostly different than the approximate 124,900 angel investors who fund companies in the second half of 2011. The key is to go out and FIND these angel investors (which is easy to do if you know how to -- more on this below).

Ok, back to the data.

The average deal size (i.e., the amount of funding received by the average entrepreneur raising angel funding in the first half of 2011), was $338,400.

Thirty-nine percent of the angel funding went to seed and start-up stage companies. ("seed" companies are generally companies at the idea or pre-proof of concept stage).

Sixty-one percent of the funding went to early and expansion stage companies. 

What types of companies received the funding?  Here's the breakdown:

  • Healthcare services/medical devices and equipment: 25%
  • Industrial/energy: 17%
  • Biotech: 14%
  • Software: 11%
  • Media: 8%
  • Retail: 8%
  • Other: 17%


Note that "other" represents tons of different types of businesses.

Finally, the report showed that angel investments continue to be a significant contributor to job growth; these investments created 134,130 new jobs in the United States in 2011, or five jobs per angel investment.

So those are the most recent facts about angel funding.

Now, let me tell you the truth about angel funding. And the truth is that the vast majority of angel investors don't know about these facts.

They don't know that there are hundreds of thousands of angel investors out there. They don't know that the number of angel investments is increasing. They don't know about the "hot" sectors. Etc.

What they DO know is this.

1) The stock market has been crazy, and they are no longer guaranteed (as they pretty much were before 2000) that if they put money into the stock market in a diversified portfolio and let it sit, that they will earn great returns.

2) They will invest in entrepreneurs who exhibit certain criteria.

What are these criteria?

Here are the 4 angel investor criteria that I've identified in helping thousands of entrepreneurs raise this form of funding:

 1. They think they can get a solid return on investment. Obviously, investing at the earliest stages for a company that eventually goes big can earn the investor their money back and much more. But just beating the next best alternative (i.e., the stock market) is sometimes enough.

2. They know, like and trust the entrepreneur. Like with friends and family investments, sometimes angels know and trust the entrepreneurs and want to help them succeed.

3. They feel they can add real value: many angels have lots of relevant experience that can help the companies they fund, from experience hiring staff to connections with key potential customers or suppliers. If angels can see their involvement adding a lot of value to the company, they might be very interested in investing.

4. Sometimes the angel wants or likes the action. Simply put, angel investing is exciting. It is generally a higher risk/higher reward version of the public stock markets requiring a more entrepreneurial analysis which is highly intriguing.


26,300 entrepreneurs received angel during the first half of 2011. That's a lot of entrepreneurs. If you need funding, there is no reason you shouldn't be able to also raise angel funding in the next 6 months.

In the "Suggested Resource" section below is the tool I created to help you raise this great form of funding.

 

Suggested Resource: In Angel Funding Formula, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This video explains more.


Share this article:


Most Popular
New Videos

"Business Plan
SHORT-CUT"

If you want to raise capital, then you need a professional business plan. This video shows you how to finish your business plan in 1 day.

CLICK HERE
to watch the video.

"The TRUTH About
Venture Capital"

Most entrepreneurs fail to raise venture capital because they make a really BIG mistake when approaching investors. And on the other hand, the entrepreneurs who get funding all have one thing in common. What makes the difference?

CLICK HERE
to watch the video.

"Brand NEW
Money Source?"

The Internet has created great opportunities for entrepreneurs. Most recently, a new online funding phenomenon allows you to quickly raise money to start your business.

CLICK HERE
to watch the video.

"Old-School Leadership
is DEAD"

"Barking orders" and other forms of intimidating followers to get things done just doesn't work any more. So how do you lead your company to success in the 21st century?

CLICK HERE
to watch the video.

Blog Authors

Jay Turo

Dave Lavinsky