ANGELS IN THE ARENA, part one
As an entrepreneur, I cross paths with many Angels and VCs, and have gained valuable insight into how these branches of startup investing function. Here’s the good, the bad and the ugly about Angel Investors:
The definition of ‘Angel’ is very vague. Almost anyone can be an Angel investor if they are willing to part with some cash. Angels often are driven less by the ‘hard numbers’ (If one can even call VC math scientific!!) and more by their gut feelings: Do they like the team? Do they want to get involved? Have they worked with the team in any capacity before? Do they see the venture as something that could be profitable? If Angels want to get involved, the only other requirement is that they have the liquidity to deploy some capital into the venture.
Angels are typically wealthy individuals with some affinity for the type of companies that they invest in. They are often people who have had some success as entrepreneurs themselves, then gone on to achieve some degree of success and stability. This means they’ve experienced the intense uncertainty and thrill of founding a successful company, and despite their new wealth and accompanying stability, can’t entirely leave the high-risk world of entrepreneurship behind. Like the retired Football player who continues on as a coach or manager, they have a deep understanding of the ‘game’, and they can’t quite retire: they need it to feel alive!
One unfortunate side effect of this reality is that many very risky business end up raising angel money and losing it, which can taint perception of the practice. In my opinion, this perception is simply a problem of the loose categorization I mentioned earlier: it is nearly impossible to determine what qualifies as an angel investment and what doesn’t. I posit that a massive amount of ‘angel’ money is lost because it came from the FFF investors (Friends, Family, and Fools), and NOT because the venture was deemed viable or high-potential.