PBT Consulting
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Types of Angel Investors
It is very important that you try to determine what type of angel investors you need for your investment deal so that you don't waste your time. The following list, prepared by a well known venture capitalist, classifies angel investors into different types.
Serial Angels - These angels are perhaps the most productive angel type because these angels often add significant value to the companies in which they invest. A serial angel has done it before - he or she has put money on the table for an investment in an early-stage opportunity, cashed out (or "harvested," as they say) the investment, and then put the profits into the next opportunity.
A subset of serial angels (also known as celebrity angels) consists of former entrepreneurs - people like Netscape's Jim Clark and Microsoft's Paul Allen. Although their fortunes take them way beyond typical angels, entrepreneurs who have built major companies and sold them usually retain their appetite for the game.
Tire Kickers - These angels are the opposite of serial agents. They lack a genuine commitment to angel investing - at least at present - but they're using the process as a means of educating themselves. Tire kickers are newcomers to the angel investment arena and generally do not have a portfolio of prior angel investments.
Trailblazer Angels - These angels are experienced investors, typically partners in investment banks and venture capital firms. Although their firms may not trouble themselves with any deal worth less than $50 million (the breakpoint for the VCs these days is a round of more than $8 million, which means a pre-money valuation between $12 and $20 million), the individual partners, usually with the blessing of their employers, are often interested in incubating deals that show exceptional promise, with an eye on keeping a link to the company until it reaches adolescence and becomes a desirable client for the angels' host organization.
Some venture capital firms and investment banks have rules against this practice because conflicts of interest can get tricky. For example, the VC firm and individual partner may invest in the same enterprise but a different price levels. However, many banks and firms encourage angel investing as a way to keep the pipeline flowing.
These angels are often the most desirable because of the so-called chaperone rule, which states that the odds of a startup company succeeding are significantly enhanced when the company has a chaperone from the get-go, an
experienced guide on the trip from the embryo to the IPO.
Retired Angels or "Godfathers" - These angels are a common phenomenon. A number of business executive have been able to generate enough personal capital to enable them to quit their jobs and "retire." As a group, they are vigorous, in full possession of their faculties, sometimes young (in their late 40s or early 50s), and perfectly capable of keeping up in the so-called rat race.
Often restless and looking for something to do - charitable and other pro bono activities soak up only a portion of their energy - many naturally turn to angel investing, but with a distinct point of view. They aren't looking to become passive investors; they're looking t add their skills and experience to the companies in which they invest, often serving on their boards and, in most cases, at least as advisors.
Some good examples of retired angels include Bill Gates, Ted Turner and Warren Buffet
Angel Syndicates or Angel Networks - The are groups of angels who invest together, combining their capital for more influence in more material deals. The best-known syndicate, the Band of Angels in Palo Alto, California, has 120 members, averages $600,000 per investment, and has invested close to $50 million total. Syndicates such as the Band of Angels have helped legitimize this particular form of collective investing.
Angels are significantly more entrepreneurial than venture capitalists, with 75 percent to 83 percent having operational start-up experience, compared with only about a third of venture capitalists. One study found that the average number of entrepreneurial investments made by business angels during the last five years was 2.45, while two West Coast studies claim that angels typically make two or three investments every three years.
Around 75 percent of angels claim that their principal source of wealth is their own past business, while the remaining 25 percent earned it from quoted investments. The size of angel investment ranges are as follows:
20 percent of less than $25,000
40 percent of $25,000 to $99,000
25 percent of $100,000 to $250,000
15 percent of more than $250,000.
Tommy Toy
PBT Consulting
Concord, CA 94521
Land: (925) 676-0693
Cell: (925) 768-1805
Fax: (925) 676-0693
Email: turk5555@sprynet.com
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