Angel Investors: Pennies from Heaven?
Angels are generally the next step in the small business investment continuum. Like friends and family, angels are often willing to invest in promising concepts in the earliest stages. However, they are likely to be more demanding in their expectations. They will want to see a solid business plan—which every business should have regardless—and receive regular progress reports. Angels typically enter into a deal only if it includes a viable exit strategy with the possibility of strong future profits.
There are two types of angel firms, says Karl Elderkin, founder and managing partner of Athenian Venture Partners, which has offi ces in Athens, Ohio, and Ft. Lauderdale, Florida. The first is the individual angel investor, who usually does a limited number of deals, sits on the boards of the companies he or she finances and often provides additional assistance or guidance related to operational or strategic matters. The second type is a group of angels working together and sharing deals with each other. Both types of angels tend to specialize in particular industries or businesses, so it's important to target your fundraising efforts appropriately.
For example, Ohio TechAngels (www.ohiotechgangels.com) provides investment capital for the commercialization of innovations in information technology, advanced materials and medical technology. It is part of the Ohio Third Frontier (www.OhioThirdFrontier.com) program, which is dedicated to accelerating the commercialization of high-tech research capabilities in the state. A listing of angel investment sources can be found at www.angel-investor-network.com. Angel investors tend to conduct a thorough investigation ("due diligence") of the companies that approach them for funding, a process that can take several months.
