Angel investors provide vital funding and support for early-stage startups, but it's crucial to recognize the distinctions in their approach.
There are four primary types of angel investors, each with unique investment styles, objectives, investment sizes, and decision-making methods.
When connecting with angel investors, whether on Linkedin or elsewhere, it's essential to grasp their operating preferences. Some work independently, while others collaborate with angel groups or investment clubs. Certain angels lead investment efforts, while some are associated with venture capitalists and rely on them for investment closures.
1. Venture Capitalists
Some angel investors work with venture capital firms as venture partners. These partners, often experienced entrepreneurs or investors, assist the fund by identifying potential investments, assessing startups, and offering guidance to portfolio companies.
When a startup founder approaches them, venture partners assess the startup according to the fund's criteria and due diligence. They then present the opportunity to the investment committee, which decides whether to invest.
This process, typical for VC investments, can span several months, with investment amounts ranging from hundreds of thousands to several million dollars.
2. Independent Angels
These are experienced individual angel investors who have high startup investment success rates. They evaluate startup opportunities by discussing the business plan and financials, researching the market, and assessing the founding team. They make investment decisions autonomously and can invest relatively quickly, sometimes within weeks.
The amount they invest varies, with some offering small sums, and the ones labeled "super-angels" tend to contribute millions.
3. Angels Group
Angel groups are formal organizations of individual investors who come together to invest in startups. When a startup founder approaches them, they usually guide the founder to the group's decision-makers.
These decision-makers then carry out due diligence on the startup, which involves examining financials, meeting with founders, and conducting market research. After due diligence, the investment opportunity is presented to the group for a vote.
This process can take months, depending on group size and deal complexity. Angel groups usually invest hundreds of thousands of dollars, but the investment amounts can vary widely.
4. Angel Syndicate
Similar to angel groups, syndicates find and negotiate deals, attracting other investors. If a startup founder approaches them, they assess the company, its finances, and its terms.
If the syndicate is approached by a startup founder, they will conduct due diligence on the company, review financials, and negotiate terms.
Unlike angel groups which take months, syndicates tend to operate much faster taking only weeks. The investment amount is similar to that of the angel groups mentioned earlier.
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*The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.