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Fool's Gold - The Truth Behind Angel Investing in America (see also my blog at www.gasellit.com) by Mind Map: Fool
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Fool's Gold - The Truth Behind Angel Investing in America (see also my blog at www.gasellit.com)

Angel investing is 8% of all informal investing

Market size

Angel investments = VC investments

Angle investments is 14% of all informal investments

3% of M&A market

Types of investors

Accredited

Non-accredited

All variations

Sophistication

Naive

Knowledgeable

Role

Passive

Active

Investment stages

Early stage

Later stage

Investment size

Small

Large

Median 10,000 USD

Instrument

Debt

Equity

Risk level

High

Low

Typical Angel Investor

Not especially wealthy

Not especially well-educated

Not especially old

Not necessarily male

Not former entrepreneur

No difference to typical Friend's and Family Money

No more startup experience than F&F investor

Makes less than 1 investment per year

Motivations to invest

To remain involved in the start-up scene

To learn something new

To find a job

As a hobby

To make money

To give back to the community

Added value

No added value

There are few exceptions

It's just money

What should government do

Angel groups

Also NON-accredited investors

Startups are born where there are other startups, entrepreneurs, and respect

Is there a problem

There aren't enough (growth) entrepreneurs

Role of Angel Investors

They do not fill the "gap" between F&F and VC

Having angel investment does not make getting VC easier

Investment process

No complex contracts

Typically no DD

Gut feeling valuation

Typical investment target

Also service business

Typically not high-growth business

Not only high-tech

Later stage

Often home-based

Typical startup

No complete management team in place

Older entrepreneurs than in media

More educated

Often solo entrepreneurs

Often not even only startup, 100% focus on one company not needed

What should we do

Entrepreneurs

1. Avoid believing "specialness" of angels as a category of investors, No "value difference" to F&F

2. Understand the true alternatives, such as banks and boot-strapping

3. Develop an accurate profile of angel investors

4. Understand what angels are looking for - no need to be next Google

5. Have a realistic sense when one can get angel money, It's much later than one thinks (hopes)

6. Be aware that raising money as a process is typically haphazard

7. Understand what you can get out of angels, It's just money, actually

8. Not all angels are the same - a small minority can provide more than just the money

Angels

1. Have realistic earning expectations

2. Ask yourself why you want to make angel investment

3. Have realistic expectations of what you will get in return

4. It's not difficult to become an angel investor, "All you need to do is find somebody who needs money and write a plain vanilla contract to provide the funds that are needed in return for a stake in the company"

5. Remember the angel groups

6. Be selective and focus

F&F investors

Treat angels with less awe

Don't believe the added value

VC

Angel goals are not completely aligned with VC goals

Policy Makers

1. Remember that the angel market is small

2. Remember the differences WITHIN angel market, Remember that the majority is non-accredited investors

3. Carefully assess the reasons to intervene, Tax credits do not work, Could lead to few startup over-valuation

Motivate to invest in angel groups, And help the non-accredited investors