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What is an angel investor? - Q & A

Renee calls from Florida wondering, what exactly is an angel investor?

Rich Sloan: And we are going to Renee out of Kissimmee, Florida.  Welcome to our show, Renee.

Renee:  Hey, how are you guys doing today?

Rich Sloan: We're doing great.  Did I butcher the name of your city?

Renee:  Actually no.  That's the --

Rich Sloan: It's Kissimmee, isn't it?

Renee:  Yeah.  It's real close to Orlando.

Rich Sloan: Yeah.  Okay.  So you've got a question for us?

Renee:  Yep.  I was reading an article in a business paper the other day, and what is an "angel investor," because I saw a guy, he wanted to start his business and got an angel investor.  So what is an angel investor basically?

Rich Sloan: All right.  It's a great question and it's an appropriate question for many entrepreneurs.  If you don't qualify for a bank loan, if you don't have friends and family available to you, if you've got a business that requires $20,000 or $200,000 in order to get off the ground, angel investors are an interesting target for you to consider.  And, Jeff, angels get their names because they are relatively friendly, relatively patient, high-net-worth private individuals and basically --

Jeff Sloan:  They invest directly into the company for equity in the company.  It's not a debt situation, like a bank loan.  As Rich was saying, they're high-net-worth individuals.  They invest in your company.  They take a piece of ownership in the company and they do take a piece of -- I don't want to go so far as to say "control," but at the very least influence over the business.  And some of that you want, because they can be great mentors. 

We refer to angel money as smart money, because it comes with their smarts.  You know, typically angels are those people who have earned their wealth as a result of their own success, so they can bring to you something more valuable than money, frankly, and that is, in addition to the money, it's the knowledge and the skills and the know-how and the experience that goes with having them invest in your business. 

Renee:  Okay.

Jeff Sloan:  So that's what angel investing is.  It's a great way to go for early-stage companies.  You know, an interesting note on angel investing, as we know well, Rich, is that more money is invested into startup companies by angels than all of venture capital.

Rich Sloan: Yeah, that's right.  Something like, I think it was $18 billion was provided by angel investors in the year gone by to those earliest-stage companies out there. 

Jeff Sloan:  So the bottom line is go get yourself an angel.

Rich Sloan: Yeah, exactly. 

Jeff Sloan:  Thanks for the call, Renee.

Renee:    Thank you.  You guys have a great day.

Jeff Sloan:  Okay.  Good luck to you.