Not all angels investors, and not all angel groups, are created equal. Some have built a reputation for adding phenomenal value, being staunch allies of founders as startups grow, helping them find expertise or resources through their networks.
However, there are also those who are known for their nightmares, meddling, unrealistic requests or being downright unreachable when needed.
For many entrepreneurs, angel investors can play a key role, whether they are good or bad investors. In today’s fundraising environment, the importance of angels has only grown. While conditions have remained founder-friendly in the first half of 2022, early-stage valuations are reportedly declining and some investors are taking more time to make decisions, while expecting more traction at each funding stage.
Angels are more and more everywhere
One core optimism for the founders to keep in mind is that the condition of early-stage capital has improved significantly over the past decade, with more angel investors and more venture capital funds than ever before. The Angel Capital Association reports: 278 angel groups as members, with dozens of other North American groups operating outside of the association (that’s more than double the number of angel groups a decade ago). The European investment community has similarly grown and matured, and the European Business Angel Network reports on 60 angel groups in 41 countries as members.
In addition to making a financial return, many angels have a second or third motivator that drives them to invest in startups.
Although angel groups are easy to identify thanks to public websites and formal investment processes, in fact they make up only a small fraction of the total estimated number of active angel investors. Many angels do it alone or invest with a small number of friends outside of a formal group. The Center for Venture Research estimates there were 363,460 active American angels investing in 69,000 startups in 2021, an increase of 2.9x from the 124,900 active angels reported in 2011.
Despite this growth, founders need to think carefully about their fundraising strategies and look for any insights or investor benefits they can find to maximize the potential of their company. More angels also means more complexity, and entrepreneurs need to navigate this complexity and determine which investors are really worth the time and money.
How Angels Think: Determine Their Secondary Motivator
Virtually all angel investors want to make money. While many of the best angels mentally write off their investment once they make it (there’s a good chance they’ll see a return someday), they still hope their investment will be successful. But in addition to making a financial return, many angels have a second or third motivator that drives them to invest in startups. After all, there are plenty of easier and more liquid ways to deploy capital than in startups.
As a founder, identifying these other motivators can help you resonate better with a potential investor. Understanding an angel’s motivations can also help you assess whether you want that potential investor to be part of your business for years to come.
So what are the most common angelic motivations besides making money?
