Finance & Capital mentor Guy Kawasaki responds to the following question from an reader:
Who exactly are angel investors, and how do I know if they are an appropriate funding source for my company?

Guy Kawasaki's response:
Broadly defined, angel investors are high net-worth individuals who invest in entrepreneurial companies, usually at an early stage. Like institutional venture capital firms, many angel investors provide cash to young companies and take equity in return. One difference is that angel investors typically invest smaller amounts of money in individual companies than venture capitalists do, making them a possible resource for companies that have exhausted their "friends and family" financing options but are not ready to approach VCs for capital.

Some angel investors are members of angel groups, allowing them to increase their access to investment opportunities and giving them the possibility of investing jointly with other angels to hedge their risk. Tapping into these networks is one way to start looking for investors. Also make use of your personal network—especially your professional advisers. Your network may well be able to suggest potential angels.

In looking for angels to target, don't forget that choosing an angel investor is a great opportunity to gain an advisor. So do your research. The best investor for your start-up will be the one who can contribute significant experience, knowledge, and networking opportunities, as well as the cash you need to grow your business.

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