Angels are among us.
EDITION 04: INVEST ON PURPOSE
Did you know…
The term "angel investor" actually comes from the Broadway world, where wealthy individuals would fund plays so they didn’t have to rely on traditional lenders. The angels would only get paid back if the production turned out to be a hit.
In the 1970s, as Silicon Valley’s tech boom started, angel investing evolved. Just like with Broadway plays, early tech founders—often overlooked by banks—found angels willing to take a chance on their risky but high-reward ideas.
Sounds fancy. But it’s actually more accessible than you might think. Let’s dig in.
Imagine this…
You’re a first-time founder with a dream of opening a wine bar that celebrates local producers and fosters a welcoming community. You’ve pitched your idea to banks, but they’re hesitant, citing the early stage of your business and lack of a proven track record. Then, one day, an angel investor who shares your passion for supporting small businesses sees the potential in your vision. She takes a chance, offering you that first critical check. Suddenly, you can hire a team, secure a space, and bring your concept to life. That investment doesn’t just fund your dream—it gives you the momentum to turn it into a thriving reality.
Does this sound like something you’d like to be part of? Keep reading to learn how to get started (and even if it doesn’t, stick around—because the more you know, right?).
Welcome to Angel Investing.
As we talked about in last week's newsletter, angel investing is all about backing early-stage companies and founders that investors believe in and want to support. Typically, the checks are smaller than those from venture capital firms, and the return only comes if the company eventually sells.
According to the Small Business Administration, there are now over 250,000 active angel investors in the U.S., funding around 30,000 companies each year—and that number keeps growing. This is especially important as traditional lending is becoming harder to access, pushing companies to get more creative when it comes to raising capital.
You can get involved with angel investing as part of an angel network or as an individual angel. Each option has its own pros and cons.
Angel Network
Investing as part of an angel network means pooling your resources with other investors to fund startups together. The benefits? Shared risk, access to a stream of vetted deals, and support with research. The trade-off is less control over decisions and smaller returns since profits are shared.
Angel Investor
Going solo gives you full control over your investments and the potential for bigger returns. But with that comes higher risk, fewer investment opportunities (unless you're well-connected), and the responsibility of managing everything yourself.
Now that you know the options, you might be wondering—Is angel investing right for me?
How to apply this…
Here are a few questions to help you figure that out before diving in.
Am I comfortable with risk? Angel investing involves backing early-stage companies, which means a high level of risk. Many startups fail, so it's important to be comfortable with the possibility of losing your entire investment.
Do I have the time and expertise to evaluate opportunities? Angel investing requires research to choose the right startups to back. If you’re not familiar with the process or the industry, you’ll need to be willing to invest time in learning or join a network to help you assess deals.
Am I ready to take a long-term approach? Angel investments can take several years to generate returns, often only coming through if the company is sold or goes public. If you're looking for quick gains, angel investing may not be the right fit for you.
Yes, these are all me, how to do I start already? Begin by considering the types of companies you're interested in and determining your budget for investments. Then, start networking with experienced angel investors and networks to learn more and begin getting involved.
In summary…
Whether you’re ready to join the ranks of the angels among us or just curious to learn more, remember—it’s not just about the potential returns you could earn, it's about backing the innovators who have the potential to make a real impact to your community and to the world.
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Sources
https://www.linkedin.com/pulse/from-broadway-boardrooms-brief-history-angel-vinay-jaiswal--azvbf/
https://www.angelinvestmentnetwork.us/angel-investors-the-usa
