Frequently Asked Questions

You Need to Assess Risk Dispassionately

• Risk is not derogatory or negative, simply a measurement of the likelihood of predicted future outcomes  
  • Lower risk - work with established & experienced businesses / management
•  Three main categories of risk:
  •  Product (Technology) risk: Is there a sustainable competitive advantage for the product (proprietary technology)?
  • Market risk: Is there a significant unmet consumer or clinical need and a large potential market?
  •  Execution risk:  Does the Management Team possess the following qualities?
    • Experience: Track record of success
    • Leaders in their Field
      
      

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Unaccredited and Accredited Investors

. Unaccredited angel investor: An individual who does not meet the Securities and

     Exchange Commission's (SEC) accreditation requirements and who uses his or

     her own money to provide capital to a private business owned and operated by

     someone else, who is neither a friend nor a family member.

. Accredited angel investor: An individual who meets SEC accreditation

     requirements and who uses his or her own money to provide capital to a private

     business owned and operated by someone else, who is neither a friend nor a

     family member.

• The federal securities laws define the term "accredited investor" in Rule 501 of Regulation D as a person whose household net worth exceeds $1 million, or whose income exceeds $200,000 in the two previous years if single (or $300,000 if married) and reasonably expects to maintain the same income level

 

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The Center for Venture Research at the University of New Hampshire which does research on angel investments has developed the following profile of angel investors:

• The "average" private investor is 47 years old with an annual income of $90,000, a net worth of $750,000, is college educated, has been self employed.
• Most angels invest close to home and rarely put in more than a few hundred thousand dollars.
• Informal investment appears to be the largest source of external equity capital for small businesses. 9 out of 10 investments are devoted to small firms with fewer than 20 employees.
• Informal investors are older, have higher incomes, and are better educated than the average citizen, yet they are not often millionaires. They are a diverse group, displaying a wide range of personal characteristics and investment behavior.
• 7 out of 10 investments are made within 50 miles of the investor's home or office.
• Investors expect an average 26% annual return at the time they invest.
• Investors accept an average of 3 deals for every 10 considered.  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.
• There appears to be no shortage of informal capital funds.  Investors included in the study would have invested almost 35% more than they did if acceptable opportunities had been available.

 

 

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