Angel Investors play a crucial role in a business’ life cycle and the U.S economy. For example, when at the Seed and Start-up stages of a new company, the capital that an Angel Investor can provide will add valuable growth and expansion for the early business. If an Angel Investor is active in day-to-day operations, or as a board member, even more benefits and experience can be added to the young entrepreneurial endeavor or management team. Without this help, many novice entrepreneurs may never build large thriving businesses.
Angel investment bridges the gap for companies that are pulling themselves up by the bootstraps (bootstrapping) to later seek institutional funding; it covers a broader area of different stages of business. This is partly due to the many types of Angel Investors. The four primary types of Angel Investors are the following: Passive Angels, Professional Angels, Active Angels, and Super Active Angels.
Passive Angels will most likely invest through a fund or through a Private Placement Memorandum, without direct involvement with the company. When the entrepreneur is at the Seed Stage, and has the least amount of money to spend on services, then the work done by a Professional Angel will have the most value. Professional Angels invest time into an entrepreneurial endeavor in exchange for shares. Active or Super Angels may even get involved during the Start-up Stage and strategically build the company throughout this critical point, and continue all the way through to the Expansion Stage, in which case they will exit as part of the capital influx. One of the most substantial benefits of a company having an Active Angel on their side is the wealth of experience that the investor will have with actively growing businesses. These Active Angels are able to cut years off the normal Business Life Cycle and set the stage for institutional Investors.
Less than 1% of companies have reached the pinnacle of being a Market-Maker Mega Company without the use of Venture Capital; however, seeking out Venture Capital is incredibly risky, and many can’t make it. Angel Investors can aid new companies in traveling down the road to mega company success, essentially teaching entrepreneurs how to walk before they run. Venture Capitalists, after all, land further up the Business Life Cycle where expansion and Later-Stage companies possess greater potential, better track records, and larger capital requirements. How these successful companies come to obtain those valuable assets can be traced back, many times over, to Angel Investors.
Karen Rands is President and CEO of Kugarand Holdings LLC, a company that connects entrepreneurs with Angel Investors. Karen got involved in the world of angel investing in 2001. She left corporate world to join one of her clients as their VP and to help them raise their last bit of go-to-market capital. What she did discover is a whole new world of investing. As Karen Rands got more involved in the world of angel investing, she had requests from high net-worth men and women and their money managers to recommend training so they could learn How to be an Angel Investor. In 2003, Karen launched the Learn to Be an Angel Investor (http://www.howtobeanangelinvestor.com) ebook series. Thousands opted in to receive the original drafts. Finally, the first 5 books of that series are available to purchase at http://www.kyrmedia.com Karen Rands’ involvement in the world of angel investing grew with the acquisition of the Network of Business Angels & Investors (http://www.nbai.net) in 2005.
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