I do not arrange angel financing for two reasons:
- It is sometimes difficult to determine who is a serious investor
- There is a higher risk of litigation with semi-professional investors (angels)
When I see deals that are suitable for angel investors I refer them to certain attorneys who have networks of angel investors. To determine suitability, here are some statistics from CenterNetworks that may prove helpful:
- Angels fund about 8 percent of the new companies started each year (founders, friends and family fund 91 percent)
- Typical angel round is $265,000
- Target return for angel investors is 30X--30 times there initial investment
While the odds are better to find an angel than a VC to fund your company, the odds are daunting and dealing with angels can be as vexing as a VC. The advantage of angels is their preference for seed stage deals and the major disadvantage is that most angels only devote a portion of their time to their investments. When the company has a problem and the angel is on vacation in Thailand, you may not get your call returned for weeks. Recommendation: use friends and family money to build revenues to $1 million + and then approach the VCs.
A blog devoted to angel financing is here.