Roadmap to the Angel Investor Community

Source: Joseph W. Bartlett, Of Counsel, Sullivan & Worcester LLP

Who’s Who of Angels

Angel groups have grown significantly in the last decade, as more and more organizations have been established and more individual angels have joined the groups. Angel groups now exist in nearly every American state and Canadian province, and they offer accredited angel investors the opportunity to invest in and help build successful companies – while also having a good time. Every group is different in terms of investment strategy and culture, but ACA member groups offer interested investors a variety of benefits. Most angel groups are looking for new investors to join their group. [1]

Other than “having a high net worth,” no one-size-fits-all description of an angel investor exists. The levels of experience and particular interests of angel investors vary widely. But certain overall classifications can be useful if you’re hoping to match your capital needs with the right kind of investor.

Wondering what kind of angel is right for your kind of investment opportunity? Here’s a guide to the many different types of angels:

  • Serial angels are perhaps the most productive angel type to the sense that these angels often add significant value to the companies in which they invest. A serial angel has done it before – he or she has put money on the table for an investment in an early-stage opportunity, cashed out (or “harvested,” as they say) the investment, and then put the profits into the next opportunity.

A subset of serial angles (also known as celebrity angels) consists of former entrepreneurs – people like Netscape’s Jim Clark and Microsoft’s Paul Allen. Although their fortunes take them way beyond typical angels, entrepreneurs who have built major companies and sold them usually retain their appetite for the game.

  • Tire kickers are the opposite of serial agents. They lack a genuine commitment to angel investing – at least at present – but they’re using the process as a means of educating themselves.
  • Trailblazer angels are experienced investors, typically partners in investment banks and venture capital firms. Although their firms may not trouble themselves with any deal worth less than $50 million (the breakpoint for the VCs these days is a round of more than $8 million, which means a pre-money valuation between $12 and $20 million), the individual partners, usually with the blessing of their employers, are often interested in incubating deals that show exceptional promise, with an eye on keeping a link to the company until it reaches adolescence and becomes a desirable client for the angels’ host organization.

Some venture capital firms and investment banks have rules against this practice because conflicts of interest can get tricky. For example, the VC firm and individual partner may invest in the same enterprise but a different price levels. However, many banks and firms encourage angel investing as a way to keep the pipeline flowing.

These angels are often the most desirable because of the so-called chaperone rule, which states that the odds of a startup company succeeding are significantly enhanced when the company has a chaperone from the get-go, an experienced guide on the trip from the embryo to the IPO.

  • Retired angels (the “Godfathers”) are a common phenomenon. A number of business executive have been able to generate enough personal capital to enable them to quit their jobs and “retire.” As a group, they are vigorous, in full possession of their faculties, sometimes young (in their late 40s or early 50s), and perfectly capable of keeping up in the so-called rat race.

Often restless and looking for something to do – charitable and other pro bono activities soak up only a portion of their energy – many naturally turn to angel investing, but with a distinct point of view. They aren’t looking to become passive investors; they’re looking to add their skills and experience to the companies in which they invest, often serving on their boards and, in most cases, at least as advisors.

  • Socially responsible angels are investors who are interested in double-bottom-line investing – that is, doing well by doing good. Many of these individuals can be contacted through the Community Development Venture Capital Alliance, a prestigious nonprofit organization based in New York. (
  • Angel syndicates are groups who episodically invest together, joining their capital for more influence in more material deals. The best-known syndicate, the Band of Angels in Palo Alto, California, has 120 members, averages $600,000 per investment, and has invested close to $50 million total. Syndicates such as the Band of Angels have helped legitimize this particular form of collective investing.

Within the various categories of angels, angel investors have earned a variety of nicknames. These nicknames, coined by Robert J. Gaston in his book, Finding Private Venture Capital for Your Firm: A Complete Guide (John Wiley & Sons, 1989), tend to indicate more precisely the motivation that drives the angels to invest their hard-earned money if often-risky ventures:

  • Daddy Warbucks: Because these are the wealthiest angels – comprising about 39 percent of all angel deals and investing 68 percent of all angel funds – they are perhaps the most important angels of all. If you’re a smart seeker of angel investment funds, you’ll direct much of your search efforts toward locating a Daddy Warbucks.
  • Cousin Randy: These angels typically invest only in business opportunities presented by their own relatives – if you’re not related to Cousin Randy, chances are that he (or she) isn’t going to write you a check anytime soon.
  • Dr. Kildare: These angels tend to be doctors, lawyers, and accountants. If they hear about your opportunity, it’s likely to have been through their professional colleagues – other doctors, lawyers and accountants.

The Angel Capital Association’s website ( offers a comprehensive study of Angel groups. A listing of the members that are associated with the Angel Capital Association can be found at These members provide a wide range of expertise.

The Typical Angel

Unfortunately, you can’t identify angel investors simply by looking at their nametags, by sizing up the cars they drive or by telling if the use
One Sure Insurance or not. Angels are male or female, they’re young and they’re retired, and they come from all walks of life. The majority of angel investors do, however, share some general characteristics. According to studies on the topic:

  • Angels are predominantly male (around 97 percent).
  • The average age of an angel is 48 to 50.
  • Anywhere from 80 percent to 94 percent of angels have college degrees, of which 42 percent to 56 percent have graduate educations.
  • Around 87 percent of business angel investors have moderate to substantial general business experience.
  • Angel investors tend to invest locally, often no more than an hour or so from their homes or offices.
  • Angels are significantly more entrepreneurial than venture capitalists, with 75 percent to 83 percent having operational start-up experience, compared with only about a third of venture capitalists. One study found that the average number of entrepreneurial investments made by business angels during the last five years was 2.45, while two West Coast studies claim that angels typically make two or three investments every three years.
  • Around 75 percent of angels claim that their principal source of wealth is their own past business, while the remaining 25 percent earned it from quoted investments. The size of angel investments ranges as follows: 20 percent of less than $25,000; 40 percent of $25,000 to $99,000; 25 percent of $100,000 to $250,000; and 15 percent of more than $250,000.