Get Investor Ready: Understand the 4 types of angels

These angels invest for non-economic reasons as well as for economic returns.

These angels do their own detailed due diligence. They will also involve other trusted and known resources tounderstand unfamiliar markets or technologies.

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These angels usually provide active support to the company (e.g. take Board seats if offered, provide customer and other strategic partner introductions, and provide other operational structuring and guidance to the company).

Having these angels on the Board is usually perceived to be positive by later stage investors.

These angels are active investors who guide and coach the management team to help them grow the company. They usually work with a limited set of start-ups. Guardian angels can invest significant amounts of time in thecompany, especially after they have developed confidence in the entrepreneur.

They have strong non-economic reasons to work with entrepreneurs, besides achieving high economic returns.

They invest within a 1 to 2 hour driving radius.

These angels invest substantial amounts in a limited number of start-ups. They often average $100,000–150,000 per company.

Guardian angels invest in a limited number of companies, (typically 2–4 per year), primarily in the seed stage.

Guardian angels rely on their network to source and screen opportunities. They conduct their own due diligence and consult experts to supplement their expertise.

These angels usually experience high rates of return. Many said they have recently achieved greater than 40% ROI

They usually take Board seats and provide guidance and coaching to the management team. They help recruit otherBoard members, members of the management team and, next round investors such as venture capitalists. They provide assistance in other areas based on their expertise.

Later stage investors often want guardian angels with strong business credentials to remain on the board.

Financial return angels are high net worth investors who have little relevant entrepreneurial experience and who invest in companies in which they have little industry experience. Usually these angels are high net worth individuals who have made money through the stock market, real estate, inheritance, and through professional occupations notrelated to starting up companies (such as doctors, dentists, lawyers, accountants, engineers, consultants, brokers, etc.).

These angels are investors looking for high rates of return by investing in start-up companies and do not desire to be actively involved with the start-up

No particular focus.

Often < $50,000 per investment

The number of investments varies, depending on risk profile, deals available etc. Quality deal flow can be unevenbecause brokers, accountants or lawyers supply deals to these angels on an ad hoc basis.

Usually these angels use attorneys and personal accountants to review paper work and perform limited due diligence. Their networks usually do not include venture capitalists or industry experts that could greatly aid duediligence.

The value-add to the start-up company is usually limited to financial support. Some Financial Return Angels will

provide general business and guidance support depending on their background. They may also provide access to friends and associates. Their interactions with the company are varied and dependent on the individual’s temperament.

Later stage, professional investors are less likely to invest in deals that have too many financial return angels in theprevious rounds. These investors are less aware about the ups and downs of start-up company investing and they can become impatient or "spooked" when the venture experiences a downturn. Usually these angels do not protect themselves adequately when structuring terms and conditions.

These angels have entrepreneurial experience but are investing outside their area of expertise. They may have limited angel-investing experience. They are usually followers and invest based on recommendations of other angels they trust and whose expertise they respect. Angels in this category may be Guardian Angels for other ventures.

These angels primarily seek high rates of return by investing in start-up companies outside their area of expertise, (e.g., investing in an unfamiliar industry). They may also wish to build their expertise in angel investing

No particular focus.

Varies.

Varies.

They rely on the lead angel to conduct the bulk of the due diligence, structure the terms and conditions, provide support to the start-up after investing, and monitor the progress of the start-up. They conduct some limited due diligence on their own, especially if they are trying to build their angel experience.

Moderate. Returns not as high as Guardian Angels but potentially not as low as some Financial Angels. (Based on responses from Guardian Angels investing outside their industry of expertise).

Their involvement with the start-up is usually limited though they may provide market research and other information. They may periodically review the progress of the company.

In most cases, these angel investors are patient investors with a good understanding of start-up milestones and growth stages