How to Join an Angel Investor Group

For an investor, there’s no higher thrill than getting behind a promising new enterprise early on and serving to to make it successful. At present, there are roughly 300,000 Individuals who, as angel buyers for startups, try and just do that. 

However breaking into the world of angel investing isn’t all the time simple. The Securities and Alternate Fee (SEC) permits solely accredited buyers to take part—that means it’s essential to have internet property (minus your main residence) of a minimum of $1 million or have generated an annual earnings of greater than $200,000 for the previous two years and “fairly count on the identical for the present yr.” If you happen to’re married, your mixed minimal earnings should exceed $300,000.

The quantity of lively angel buyers in america continues to develop. The Heart for Enterprise Analysis estimates that there are greater than 300,000 particular person angel buyers in america in 2019, which offer funding for over 60,000 corporations per yr.

However as a result of all of us can’t be a Jeff Bezos, it is typically smart to crew up with an investor group. Even in case you make it over the SEC’s regulatory hurdle, having any actual success normally means becoming a member of a bunch of different “angels” who can share the due diligence tasks in addition to the preliminary seed capital.

Conventional Angel Investor Teams

The excellent news for early-stage buyers is that the variety of angel funding teams within the U.S. has exploded over the previous couple of a long time. In line with the Angel Capital Affiliation (ACA), there are actually 3 times as many teams as there have been in 1999. In 2019, ACA membership consisted of 275 angel teams, with an estimated 400 complete teams within the U.S.

Nonetheless, it helps to have private connections, as most of those teams permit membership by invitation solely. That doesn’t imply you’re essentially out of luck in case you don’t have an “in” with any of the present members, nevertheless. Some will permit newer angel buyers to take part in a few conferences as a visitor. As soon as they get a way of your dedication degree and what you carry to the desk, they could ask you to affix.

Most investor teams require membership charges—sometimes of round $1,000 or extra per yr—and maintain periodic conferences the place they hear pitches from entrepreneurs in want of capital.

Benefits of Angel Teams

Though attending month-to-month or quarterly conferences may sound like a whole lot of work, there are some vital explanation why the crew method is standard amongst angel buyers. Most younger corporations are looking for extra cash than any single investor is keen to place up—usually upward of $1 million. By dividing that possession stake amongst a number of buyers, a person could solely have to kick in say $25,000 to $50,000 on a single deal.

Buyers who band collectively also can break up the appreciable due diligence work that any main funding requires. Past being an enormous time-saver, a collaborative operation permits the funders to attract on one another’s expertise and experience. The choice to put money into a enterprise continues to be as much as the person, however on this method, potential buyers get enter from others within the group earlier than they resolve whether or not to become involved.

Maybe the most important benefit of becoming a member of a bunch, nevertheless, is with the ability to study extra offers. Angel investing is by its nature a high-risk high-reward proposition. As such, most consultants counsel having a portfolio of a minimum of 10 corporations in an effort to defend your capital. It actually helps to have a gradual circulate of leads coming in—one thing that’s laborious to attain in case you’re going solo with regard to angel investing.

On-line Investing Syndicates

If you happen to like the thought of becoming a member of up with different buyers, however don’t need the dedication of a conventional investing group, you do have an alternate. On-line syndicates akin to AngelList permit high-net-worth people to work collectively on offers, usually with no annual charges and no conferences.

On-line teams are additionally engaging to those that aren’t able to put up massive sums of money. Some syndicates allow you to contribute as little as $1,000 to a selected enterprise enterprise, considerably decreasing your publicity to danger.

Sometimes, a lead investor will put up a considerable quantity of the full funding— usually round 20%—and let different syndicate members kick in smaller quantities. To compensate the lead investor for his or her bigger function within the deal, the opposite buyers conform to pay the lead a “carry”—a share of the revenue from their funding. 

Some syndicates cowl a reasonably broad vary of offers and others concentrate on a selected business, akin to expertise or healthcare. If you happen to’re concerned with connecting with different buyers, the ACA web site is an effective place to start out. There, you’ll discover a handy listing of on-line and conventional teams throughout the U.S.

The Backside Line

If you happen to’re new to angel investing, it usually helps to affix a bunch that may companion up on offers and unfold out the due diligence work. And with on-line syndicates, you don’t essentially want to satisfy face-to-face with different members to get your crack at early-stage funding alternatives.