Not everyone is an angel Investors, and all angel groups, are not created equal. Some have built reputations by adding incredible value, being strong allies to founders on a startup scale, and helping them access knowledge or resources through their networks.
However, you also have some people who are delusional, intrusive, make unrealistic demands, or are simply unavailable when needed.
Angel investors can play a key role for many entrepreneurs, whether they are good or bad investors. Angels are growing in importance in the current fundraising environment. In the year While terms in the first half of 2022 remain founder-friendly, seed-level valuations are said to be declining, and some investors are taking longer to make decisions, expecting higher levels of traction at each financing level.
Angels are multiplying everywhere.
One hopeful note for founders is that the state of “seed” capital has improved dramatically over the past decade, with more angel investors and venture funds than ever before. The Angel Capital Association reports 278 angel groups as members, with dozens more North American groups operating outside the association (this is double the number of angel groups a decade ago). The European investment community has similarly grown and matured, with the European Business Angle Network reporting membership of over 60 angel groups in 41 countries.
Beyond financial returns, many angels have a second or third motivation to invest in a startup.
Although angel groups are easily identified due to public websites and formal investment processes, they comprise a small fraction of the total number of active angel investors. Many angels go it alone or invest with a small list of friends outside of any formal group. The Venture Research Center estimates there will be 363,460 US angels investing in 69,000 startups by 2021, up 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 investor insights or edges to maximize their company’s potential. More angels also means more complexity, and entrepreneurs must navigate this complexity and decide which investors are worth their time and money.
How angels think: determine their secondary motivation
All angel investors want to make money. Many of the best angels write down their investment once they’ve made it mentally (knowing that opportunities will return) hoping to see the results of their investment successfully. But beyond financial returns, many angels have a second or third motivation to invest in a startup. After all, there are much easier and more liquid ways to deploy capital than startups.
As a founder, identifying these other motivators will help you better resonate with a prospective investor. Understanding the motivation of an angel can help you assess whether you want a prospective investor to be a part of your company for years to come.
So besides making money, what are the most common angel motivations?