The term “angel investor” refers to high-net worth individuals who typically invest in and support start-up companies in their early stages of growth. In addition to the value provided by early funding, angel investors are often experienced professionals who can offer wisdom and guidance to the entrepreneur and who have the patience to allow time for normal company maturation. Most angels invest on a regional basis, being interested in personal relationships with companies and employees, as well as in giving back to their communities.

In recent years, the trend has been for individual angels to band together and form “angel groups.” This trend has occurred because individual angel investors have found many advantages to working together, including better investment decisions, enhanced deal flow and the ability to combine their funds into larger and higher-quality investments. While no two angel groups operate exactly alike, most angel groups maintain a local or regional geographic focus in order to maximize members’ ability to actively engage in the growth of their investments. Angel groups often have websites that provide directions for business plan submissions. After screening business plans for top-quality deals that match the group’s criteria, these groups organize regular meetings for members to hear pitches from selected companies. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. Based on the group’s structure, investments are either made directly by individual members, or by the group as a whole. Most groups apply standard terms to their investments, with some flexibility to negotiate.

The typical angel group investment ranges widely from $50,000 to over $1,000,000 per deal, depending on how many group members are interested in the deal and the financial strength of those members. Investments are often made at an early stage of a company’s development, when the future success of the venture is far from certain. As a result, angel investing is a high risk undertaking that can result in significant loss to investors. For this added risk, most angel investors seek returns of at least ten times their investment within a 3 to 7 year time horizon. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures.


In order to properly assess your prospects for raising capital from angel investors, you should produce a comprehensive business plan that articulates your key business strategies for how you will grow your venture. The critical task is to analyze your company in the same way the investor will when assessing risks and potential returns, and discuss your strengths (and weaknesses) on the following important dimensions:

MARKET: A thorough market analysis demonstrating:

    • An identifiable market segment with market potential of at least $100 million
    • A significant demand for your proposed solution
    • Large and growing projected spending in your product category
    • A plan to achieve widespread market penetration for your products and services as efficiently as possible
    • Discussion about your company’s use of either an internal, direct sales team or external channel partners

COMPETITION: Produce information on the marketplace including:

    • An analysis of potential competitors including your company’s differentiation points and barriers to entry
    • A proven concept behind your product or technology confirmed with data or by objective experts
    • Protected intellectual property, along with an exhaustive search to be sure that you are not infringing on patents or trademarks held by others

MANAGEMENT: Demonstrate:

    • A management team with experience (preferably in your opportunity’s industry) and a willingness to be coached
    • An understanding that yielding some control and decision-making authority to outside investors may be required


    • Show reasonable financial projections (including an income statement, cash flow and balance sheet and supporting spreadsheets) based on logical, realistic assumptions
    • Lay out a pathway to achieve high margins (+15%) and consistent cash flow growth
    • Outline a funding requirement between $200,000 to $2,000,000 to finance growth activities, including product development, recruiting key staff, launching sales and marketing activity
    • Propose a clear exit strategy that will enable angel investors to generate a return of at least ten times their initial investment

If your company needs capital to take your venture to the next level and you have prepared a business plan that adequately addresses the above topics, angel capital is likely an excellent funding option for your business.