This document provides frequently asked questions about angel investors and angel groups. It defines angel investors as high net worth individuals who invest directly in startups in exchange for equity. It states that in 2008, U.S. angel investors invested $19 billion in 55,000 deals. Angel groups allow individual angels to pool their capital to make larger investments, with the average group investing $1.94 million in 7.3 deals per year. The document provides additional details on the types of companies angels invest in, their role in helping startups beyond financial capital, differences between angels and venture capitalists, statistics on the number of angel investors and groups in the U.S., and the risks involved in angel investing.

1. A ngel N etworks:
Frequently Asked
Questions
Chapter 2.2

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FAQs About Angel Investing
The Angel Capital Association (ACA) is the trade
association of leading angel investment groups in North
America. ACA's mission is to support the growth, financial
stability and investment success of its member angel
groups by sharing best practices and industry data,
providing professional development, and promoting
group membership, networking and collaboration. The
association also serves as the public policy voice of the
angel community and is focused on advancing policies at
the state and federal level that support and promote
angel investing.
Angel Investors
 What is an angel investor? An "angel" is a high net worth
individual who invests directly into promising entrepreneurial
businesses in return for stock in the companies. Many are
entrepreneurs themselves, as well as corporate leaders and
business professionals.
 How much do they invest and in how many businesses?
The Center for Venture Research estimates that U.S. angel
investors invested $19 billion in 55,000 deals (about 35,000
small businesses) in 2008. Many of the investments were in
start-up or very early-stage companies.

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 What kind of companies do angels invest in? Angels look
for new innovative companies that can grow quickly in sales
and value (creating jobs along the way). Examples of angel-backed
businesses include Google, Yahoo, Amazon,
Starbucks, Facebook, Costco, and PayPal.
 How do angels help small businesses? In addition to
financial capital, top angels mentor and coach their portfolio
companies, often leading to more healthy growth. They
introduce entrepreneurs to potential customers and investors,
see around potential problem areas, and help the start-up firms
gain credibility in their fields. It should be noted that the best
angel capital goes to the innovative companies that have the
potential to grow to hundreds of employees and $50 million in
sales within 3 to 7 years of start-up.
 Are angels different from venture capitalists? Angels
generally invest their own money in start-ups and very early
stage companies, while VCs mostly provide capital they have
raised from others to later-stage businesses for growth.
 How many angel investors are there in the U.S.? The best
available estimates are that about 225,000 people have made
an angel investment in the last two years (including accredited
and non-accredited investors). Many more people could
become angels based on a net worth of $1 million or more, the
potential number of angel investors is 4 million.
 Is angel investing risky? Yes. A November, 2007 academic
study of angel investments found that angels lose some or all
of their money in 52 percent of their investment deals because
the companies go out of business. The most sophisticated

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angels make at least ten investments in order to make a return
on their investment, counting on one or two to provide nearly
all of their return.
Angel Groups
 What is an angel group? Individual angels are joining
together with other angels to evaluate and invest in
entrepreneurial ventures. The angels can pool their capital to
make larger investments. The Angel Capital Education
Foundation has 300 American groups in its database and lists
many of them on its Web site, www.angelcapitaleducation.org.
 What are the important statistics for angel groups? The
average ACA member angel group had 42 member angels and
invested a total of $1.94 million in 7.3 deals per year in 2007.
Between 10,000 and 15,000 angels are believed to belong to
angel groups in the U.S.
 Is there are group near me? Probably. There is now a group
in operation or development in almost every U.S. state.
 Why are angel groups important? Angel groups are
generally easier for entrepreneurs to find and often become the
central connector of deals in their communities, include some
of the most sophisticated and active angel investors in the
country, have been recognized for job creation and generation
of additional venture capital for companies, and are a leading
indicator of angel investor activity.
 Where can I get more information? More information is
available via http://www.angelcapitalassociation.org/.

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