Who are Business Angels?
There are a lot of types of angel investors with different personalities and motives in modern business world. Despite this adversity, many angel investors divide into three main categories:
Core angels- These are individual investors with impressive business experience who have managed and owned successful businesses of their own. Their solid amount of financial wealth is a result of a relatively long period of time. They are committed to angel investing and continue to be involved with high risk investments despite their losses. They possess a diversified portfolio that involves all industries, including public and private equity and real estate. They can be a valuable mentors and advisors to their invested companies.
High-tech angels - These investors may have less experience than core angels, but they invest only in the latest trends of modern technology. Their investments mainly depend on the value of their other high-tech holdings. Many high-tech angels enjoy the risk of their deals as well as the excitement about bringing a novel technology to the market place. Some of them may even choose not to be actively involved in their invested companies just because they don’t like to deal with the daily routine of business operation.
Return on investment (ROI) angels- This type of investors is primarily interested in financial reward of high-risk investments. Their motivation behind investing is their acknowledgement of what other angels total income may be. ROI angels usually stay away from investing when market performance is poor and they usually show up once the market shows stability and improvement. They consider each of their investments as another company added to their diversified portfolio. Usually, they aren’t actively involved in the invested companies.
Different types of angel investors
Corporate angels - These individuals are usually former business executives from large corporations who have been demoted, have taken early retirement, or have been replaced. Profitability of their investment is their overall goal, they also seek personal opportunity when investing. They can claim that they are looking for an investment opportunity but the truth may be that they are really looking for a job. For example, many corporate angels are looking to invest in one company and seek a paid position there, which is often part of the business deal. They usually have about $1 million in cash and may invest as much as $200,000 in a single company. Most of them can be extremely demanding for control once they occupy their desired position in the invested company.
Entrepreneurial angels - These people are successful angel investors who own and operate their own businesses. Their constant flow of income allows them to make frequent high-risk investments and provide a larger amount of capital for start-ups. Entrepreneurial angels usually make average investments anywhere from $200,000 to $500,000 and are known for investing more money into one the same company when they see progress. They enjoy their personal role in assisting entrepreneurs to launch a successful start-up and rarely take an active role in managing a company.
Enthusiast angels - These angels are older (age 65 and up) businessmen who are independently wealthy before their investments. They often invest small amounts of capital (between $10,000 to a few hundred thousand dollars) in several different enterprises. Investing is more like a hobby for them as they do not take an active role in management.
Micromanagement angels : These individuals are considered to be serious investors. The majority of these angels have acquired their success and wealth through their own independent and strategic efforts. They often demand a board position and are known to implement the same strategies they have used with their own companies towards their invested companies. Micromanagers will usually invest anywhere between $100,000 and $1. These angels rarely seek an active management role, but tend to emerge and be more actively involved when their invested companies do not do well.
Professional angels - These angels are professional employers, such as physicians, lawyers, accountants, etc. who invest in companies in their related field. Professional angels invest in several companies at the same time. Their capital investments range from $25,000 to $200,000 per investment. They may also provide services to their invested company (legal, accounting or financial) at a discounted price. However sometimes they could be very impatient when it comes to their investments. Professional angels are of tremendous value for initial needed capital and rarely make follow-on investments.