In our experience, founders of start-up companies seeking capital often focus too early and too exclusively on attracting interest from professionally managed venture capital funds.
Most VC funds have significant sums of cash that they need to place within four or five years and do not view small start-up investments (generally under $5 million) as a good use of their time and resources. Instead, it is often more fruitful for entrepreneurs with lower capital requirements to look to angel investors.
Angel investors are high net worth individuals (or sometimes more formal networks of individuals) who invest their own money as a start-up company’s initial capital infusion and usually also provide much-needed mentorship and connections. Because they expect to work with early stage companies who may not offer liquidity quickly, they are generally easier to deal with than traditional venture capital funds and have more patience for a company in a pre-revenue or unprofitable phase.
The best place to look for angels is generally in your own backyard.
Talk to friends and family members who have entrepreneurial experience, ask your business advisors (e.g. attorney, accountant, banker), and seek out local angel investment groups, which are currently proliferating.
There are also online angel network resources. For example, The Angel Capital Association www.angelcapitalassociation.org provides access to over 14,00 angels.
For more information on the advantages of angel investment, please contact Steven J. Enwright, Esq. at [email protected]