Andy Bechtolsheim, Google’s first individual investor, wrote a $100,000 check to Google in 1998 when it was a private company. As of April 2009, this $100,000 is worth approximately $1.5 BILLION dollars. There are countless examples of investors identifying and investing in companies well before their Initial Public Offerings (IPO’s) or acquisitions and earning truly extraordinary returns for their early investors.
- Average portfolio return for angel investors: 27% annual return
- Return expectation per deal for investments by successful angels: 5x to 20x
- Proportion of business angels that expect a 10 times or better return: 45.4%
- Number of companies founded each year that achieve $10 million or more in sales in 6 years: 3,608
- Share of drug start-ups that go public: 20.3%
- Portion of venture capital dollars invested in the top five industries (which are all technology) for venture capital: Biotechnology, Internet/software, computer hardware, communication (including mobile) and semiconductors (other electronics) - 81%
- Top reasons why people invest in private companies: To make money (obviously), to learn new things, to pay it forward
- Number of companies financed by business angels in a typical year: 50,700-57,300
- Amount invested by business angels in a typical year: $23 billion
- % of Angel Investors with a net worth of LESS than $1 million: 66.7% (really an amazing statistic as the SEC definition of an accredited investor is a person with a net worth of greater than $1 million)
- 45 to 54 - Age range with the highest odds of making angel investments - disputes the myth that most angel investor are retired
Angel investors are individuals who invest in businesses looking for a higher return than they would see from more traditional investments. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground. Usually they are the bridge from the self-funded stage of the business to the point that the business needs the level of funding that a venture capitalist would offer. Funding estimates vary, but usually range from $200,000 to $2.0 million.
The term "angel" comes from the practice in the early 1900's of wealthy businessmen investing in Broadway productions. Today "angels" typically offer expertise, experience and contacts in addition to money. Less is known about angel investing than venture capital because of the individuality and privacy of the investments, but the Small Business Administration estimates that there are at least 250,000 angels
active in the country, funding about 30,000 small companies
a year. The total investment from angels has been estimated at anywhere from $20 billion to $50 billion as compared to the $3 to $5 billion per year that the formal venture capital community invests. In fact, the potential pool of angel investors is substantially larger. There are about two million people in the United States with the discretionary net worth to make angel investments