Many entrepreneurs seek outside capital at some point during the life cycle of their business. Where capital is sourced often depends on the industry and maturity of the business. The various sources of capital include:
- Grants – utilized by companies in the concept stages of development.
- Seed Capital – often sourced from the entrepreneur, friends, and family. Seed capital is frequently used to complete prototype work and enable the company to develop to the point of having a test user or small test market.
- Angel Capital – entrepreneurs tend to seek angel investment when an injection of capital is necessary to take the company to the next level in terms of market penetration, customer acquisition and key hires to expand the team. Angel capital raised is usually in the range of $250,000 to $3,000,000.
- Venture Capital – after a company achieves significant growth and market traction, the company may look to venture capital for a strategic partner and investment of $5,000,000 or more.
Angel groups represent a large portion of early stage capital available to start up companies, and entrepreneurs benefit from the exposure to a wide set of potential investors, as well as the structured process used to facilitate a quick and efficient investment decision. Individual Angels typically invest in one to four transactions annually.
An angel may invest $25,000 to $100,000 investment per transaction, and $250,000 to $750,000 as a group. To fill larger capital raises, Angel groups will also syndicate with other Angel groups in their network. For the risk and added value they provide, angels seek returns of at least ten times their investment.
Preparing for a Capital Raise
The Angels consider a number of factors when evaluating investment opportunities, such as the management team in place, market opportunity, growth potential, and the progress made to date. Please consider the information in the sections Before Applying and Valuation before determining whether or not Angel capital is a good fit for your venture.