Angel investing originated in the USA and has continued to flourish and support the entrepreneurial activity in that country. Supported by ever
evolving law of torts and stringent laws relating to intellectual property, entrepreneurial businesses have blossomed and created tremendous wealth for the entrepreneurs as well as the investors.William Wetzel, Director of the
Center for Venture Research at the University of New Hampshire, and others have studied the so-called capital investing "angel" and have come up with a pretty fair profile of the Angel Investor :
- The "average" private investor is 47 years old, has an annual income of $90,000, a net worth of $750,000, and has been self-employed at some time in his or her career.
- The "typical" investor is better educated than the average citizen, and is not a millionaire. He or she comes will come from a wide range of backgrounds, and display a wide range of personal characteristics and
investment behaviors.
- Most "angels" will invest between $50,000 and $500,000 in a typical investment. range - 60% under 50,000; 40% between 50,000 to 500,000
- Most interested in startups; 60% of angels invest in start ups.
- Decision making process takes few weeks, typically.
- Investors accept an average of 3 deals for every 20 considered - and the most common reasons given for rejecting a deal are insufficient growth potential, overpriced equity, lack of sufficient talent of the management, or
lack of information about the entrepreneur or key personnel.
- Informal investment appears to be the largest source of external equity capital for small businesses. Nine out of 10 investments are devoted to small, mostly startup firms with fewer than 20 employees.
- There appears to be no shortage of informal capital. Investors who were included in the university study would have invested almost 35% more than they did if acceptable opportunities had been available.
- Nine out of 10 investors provide personal loans or loan guarantees to the firms they invest in. On average, this increases the available capital by 57%.
- Seven out of 10 investments made by angels are made within one day of travel from the investor's home or office. The expected return on their investments will vary greatly, depending on the nature of the business, its stage
of development, and other factors. Startups might be expected to return as much as ten times the original investment within five years; yet other companies, one to five years in age, might be expected to produce no more
than a 25% to 33% annual return at the time of investment. Investors also expect about one-third of such investments to result in a substantial capital loss.
- Estimates are that there is one angel for every 250 adults.
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