Models for Angel Organizations

Sources of capital are a critical component of entrepreneur-friendly communities. While venture capitalists (VCs) have received the lion’s share of press for their important contributions to the US entrepreneur-driven economy, VCs invested only 2% of $20.9 billion1 in 2004 investments in seed and startup companies. In this decade, VCs are investing in the later stages of development of new ventures. Angel investors, who are currently investing about the same annually ($21.5 billion2) as VCs, focus most of their attention on seed and startup ventures and invest in approximate 20 times as many companies as do VCs.

Historically, angel investors have been difficult to find. But, in recent years, angels have been joining newly-formed angel organizations. While only a handful of formal angel organizations existed a decade ago, the most recent count of angel organizations by the Kauffman Foundation identified about 140 active organizations throughout the US. Angels join organizations of their peers to ease the pain of solo investing. Angel organizations can enjoy good deal flow, utilize robust screening and investment procedures and couple collective business acumen for effective due diligence. Moreover, angels find that collaborating with like-minded angels is enjoyable.

The most important outcome of the proliferation of angel organizations, however, is significantly increased access by entrepreneurs to angels. Entrepreneurs can now easily find angels because angel organizations promote deal flow through public websites and encourage all entrepreneurs to apply for funding.

The purpose of this article is to discuss some of the successful models for angel organizations in the US. No single model seems to be proliferating more rapidly than others and all seem to be reasonably effective when matched to the needs of individual communities.

William H. Payne,Entrepreneur-in-Residence

Ewing Marion Kauffman Foundation

Full Story: http://www.angelcapitaleducation.org/dir_resources/news_detail.aspx?id=102