If you’re a new entrepreneur, chances are you’re hearing new phrases and acronyms on an almost daily basis. All you wanted was to launch your dream, not learn a new language. This is part of a crash-course on terms and ideas every new entrepreneur needs to know (and mostly understand).
Earlier in this series I mentioned venture capitalism as a form of funding for entrepreneurs and other startups. Angel investing is a popular form of venture capitalism, but with a twist. Venture capitalism involves funding from external sources, such as insurance companies, capital foundations, and retirement pensions.
Angel investing first gained its reputation almost a hundred years ago from investors who funded Broadway shows of interest to them. The same concept translates to angel investing today. Angel investing involves an individual or collective group’s personal financing and the purpose of investing is directly tied to the investor’s personal interest in the venture’s success, and not purely the financial potential.
Angel investors typically invest more in startups than existing entrepreneurs. The average investment amount is significantly smaller than most venture capitalist investments. An average angel investment can range from only a couple thousand dollars to a little over $100,000 in committed investment, while a venture capitalist typically starts at around $2 million in initial investment.
At the center of angel investing is the personal appeal of the startup itself. If an angel investor believes enough in the “greater good” of a startup, they’ll be more willing to risk a higher investment to see its success. Healthcare services, community-enhancing technology, and caused-based startups are popular choices for angel investors.
The important distinction in a startup’s approach to outside funding is to determine whether venture capitalism or angel investing specifically is the best path to pursue. Finding an investment mentor with an informed perspective is crucial to your future success as a funded startup. Either way you choose, the opportunities are endless for what a funded startup can do to launch your dream.