The REAL Definition of an “ANGEL” Investor
Post authored by Bob Voss
Angel investors or just “angels” are the mainstay for most small business start-up funding. The phrase “angel investor” has been watered down to mean almost any investor that invests in a start-up company. However, since most start-up entrepreneurs or BizOwners have difficulty raising money, they feel that if anyone will invest in their business, they must be sent by God, so they must be an “Angel”! Because I have raised a lot of money from individual investors, especially at the start-up stage, I have a somewhat different definition for an “angel” than just any investor who invests in a start-up.
To me an “angel Investor” is a person who buys into a new business with not only the expectation of making money on the investment, but also to help the business grow and gain traction in the early stages. In many cases the investor “falls in love” with the business and wants to get involved in more ways that just money. A really good angel Investor can help a start up business by bringing with them their experience, their contacts, and their wisdom. In many cases, angels can help a new BizOwner with getting the business organized properly. They can provide access to people the BizOwner could never get to, and they can help with such things as branding, marketing, vendors, and even new product development. Angels can be worth a whole lot more that just money, if you find the right ones. That is the key. There are good angels, and unfortunately, there are bad angels as well.
In the mid 90’s I was trying to manufacture an interactive video device that would allow children to interact with TV and VCR (remember VHS?) by attaching a handset with a suction cup to the screen of the TV. We were real novices at this and consequently we were getting terribly behind schedule and spending way too much money. Fortunately we found an “angel” that really got what we were doing, and he ran an electronics manufacturing company as well. This man pretty much said to us, “Boys, get out of my way! I will take it from here!” In 60 days, he solved all of our problems, got us back on track, and even saved us significant manufacturing costs. This man not only invested in the business, but because he knew what he was doing, he also saw how his expertise could really save our butts, and he really liked that he could give something back and help others. This man is one of the best examples of a really good angel investor!
Remember, once someone invests in your business they become part of your business. Just as an investor is interviewing you to see if he or she wants to invest, you need to interview them to make sure they will fit into your company, your culture, and your long term goals.