Entrepreneur FAQs of Angels
What is an Angel Investor?
From the standpoint of the Billiken Angel Network, angel investors are wealthy individuals (specifically, accredited investors) who invest in a variety of ventures by reserving a portion of their total investment portfolios to provide emerging and established companies with capital and expertise through direct, private investments. Their goal is to achieve higher returns than the typical public markets provide. Most angels are active investors - who contribute their time and experience, as well as offer introductions to valuable contacts essential to the company’s success - because they enjoy the thrill of helping entrepreneurs grow their businesses. To maximize the value added, most angels specialize in industries or technologies they understand, and invest only in companies within close geographic proximity.
What is an Angel Group?
Angel investor groups vary in structure, from formal to informal. Formal groups, like the Billiken Angel Network, follow strict participation requirements that guide members’ involvement in the group and in SLU’s efforts to grow entrepreneurship in the region.
A typical angel group’s investment ranges widely from $50,000 (for the BAN, $5,000 for student developed businesses) to $500,000 per deal, depending on how many group members are interested in the deal. While no two angel groups operate exactly alike, most angel groups (including the BAN) maintain a local or regional geographic focus in order to maximize members’ ability to actively engage in the growth of their investments.
The BAN, like many other angel groups, uses a web site to handle initial applications and business plan submission. After screening business plans for top-quality deals that match the group’s criteria, the BAN organizes quarterly breakfast or dinner meetings for members to hear pitches from companies selected to present. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. Based on the group’s structure, investments are either made directly by individual members, or by the group as a whole. Most groups apply standard terms to their investments, with some flexibility to negotiate.
What do you look for in companies?
Given our tagline “…the deals that make a difference” we seek to invest in businesses that can improve our economy and our region through making a difference by growing employment, technology, service delivery, market leadership or global stature. Along the way our member angels want to see their investment grow at rates which considerably exceed what they could receive if they invested in the stock market or in government bonds (both of which are relatively low-risk ways to make money). To get an idea of these rates, you can look at Bloomberg’s sites for government bonds, corporate bonds, or stock indexes like the S&P or Dow Jones.
Because we are open to investment in all industries at all stages we are also open to a wide range of ways to think about returns. For an established firm, we are looking for returns in the 15-20% range, and are interested in those firms where our investment can make a major difference in the overall size of the market share of the firm (e.g. a doubling of market share after the investment).
For a start-up, the size of the investment and the risk-level are key factors. For someone leaving an established firm to work in the same industry and market, having an established customer base from which to draw, returns in the range of established businesses might be acceptable. For a small-scale business being started by a student, while risk might be high because of a lack of experience, seeking a small capital investment (e.g. our $5,000 minimum) coupled with a large investment of the angel’s expertise and contacts might turn out to be an investable idea.
As the amount being sought and the riskiness of the business increases (because of the newness of technology, the size or dispersion of the market, or the experience of the entrepreneur or team), higher returns and a larger potential market size are essential to making an investment seem worthwhile. Here are the five- and six-figure types of investments where angels talk about five to ten times the investment returned within five years (through acquisition, sale of the business, or IPO).
From the standpoint of the Billiken Angel Network, angel investors are wealthy individuals (specifically, accredited investors) who invest in a variety of ventures by reserving a portion of their total investment portfolios to provide emerging and established companies with capital and expertise through direct, private investments. Their goal is to achieve higher returns than the typical public markets provide. Most angels are active investors - who contribute their time and experience, as well as offer introductions to valuable contacts essential to the company’s success - because they enjoy the thrill of helping entrepreneurs grow their businesses. To maximize the value added, most angels specialize in industries or technologies they understand, and invest only in companies within close geographic proximity.
What is an Angel Group?
Angel investor groups vary in structure, from formal to informal. Formal groups, like the Billiken Angel Network, follow strict participation requirements that guide members’ involvement in the group and in SLU’s efforts to grow entrepreneurship in the region.
A typical angel group’s investment ranges widely from $50,000 (for the BAN, $5,000 for student developed businesses) to $500,000 per deal, depending on how many group members are interested in the deal. While no two angel groups operate exactly alike, most angel groups (including the BAN) maintain a local or regional geographic focus in order to maximize members’ ability to actively engage in the growth of their investments.
The BAN, like many other angel groups, uses a web site to handle initial applications and business plan submission. After screening business plans for top-quality deals that match the group’s criteria, the BAN organizes quarterly breakfast or dinner meetings for members to hear pitches from companies selected to present. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. Based on the group’s structure, investments are either made directly by individual members, or by the group as a whole. Most groups apply standard terms to their investments, with some flexibility to negotiate.
What do you look for in companies?
Given our tagline “…the deals that make a difference” we seek to invest in businesses that can improve our economy and our region through making a difference by growing employment, technology, service delivery, market leadership or global stature. Along the way our member angels want to see their investment grow at rates which considerably exceed what they could receive if they invested in the stock market or in government bonds (both of which are relatively low-risk ways to make money). To get an idea of these rates, you can look at Bloomberg’s sites for government bonds, corporate bonds, or stock indexes like the S&P or Dow Jones.
Because we are open to investment in all industries at all stages we are also open to a wide range of ways to think about returns. For an established firm, we are looking for returns in the 15-20% range, and are interested in those firms where our investment can make a major difference in the overall size of the market share of the firm (e.g. a doubling of market share after the investment).
For a start-up, the size of the investment and the risk-level are key factors. For someone leaving an established firm to work in the same industry and market, having an established customer base from which to draw, returns in the range of established businesses might be acceptable. For a small-scale business being started by a student, while risk might be high because of a lack of experience, seeking a small capital investment (e.g. our $5,000 minimum) coupled with a large investment of the angel’s expertise and contacts might turn out to be an investable idea.
As the amount being sought and the riskiness of the business increases (because of the newness of technology, the size or dispersion of the market, or the experience of the entrepreneur or team), higher returns and a larger potential market size are essential to making an investment seem worthwhile. Here are the five- and six-figure types of investments where angels talk about five to ten times the investment returned within five years (through acquisition, sale of the business, or IPO).
