I need an angel and I am not alone. Those of us who are “starting-up” often need other funds than our own to build our businesses. The lucky ones have enough to bootstrap their way to revenue, have family and friends who invest or are able to get a loan. However, an estimated 3% of start-ups get initial funding from an angel investor.
An angel does not have wings, at least none that you can see. They are typically high net-worth individuals that understand the risk of investing in a start-up and often want a more hands-on relationship with a founder. It used to be that you had to be accredited by the SEC, but that is no longer the case, as the laws changed, allowing people who may not be wealthy to participate. Interestingly, other successful founders are writing small checks to help the fellow entrepreneurs. It is a way to pay it forward.
Just like venture capitalists (VC’s), each angel has their own unique set of criteria for investing. Some invest only in certain areas, like healthcare or consumer goods. Some are agnostic. And just like some VC’s, some want revenue before they will write a check. And they aren’t just individuals, some are groups of angels that like to spread out the risk or rely on the group for deal flow. (Deal flow refers to the amount of opportunities to invest)
And while these overall factors, apply to anyone seeking investment, it is to be noted that women and underestimated founders don’t receive the same amount of funding at any level as their counterparts. Angel funding is no different.
Despite the fact that, “women founders are outperforming their male counterparts […] not a week goes by without another headline about the growing gender gap for both founders and funders.” (Forbes)
There are angels that are comfortable writing that first check and some to underestimated founders. They understand that those who often face greater adversity are more apt to stand up to the challenge of being an entrepreneur. But, no matter who it is, it is a leap of faith to bet on someone who may just have an idea, limited traction or is a first-time founder. That is why they are called angels, unlike VC’s they are risking their own money, not someone else’s.
But those that write the first checks? Well, they actually may have a pair of wings.