Angel Investing: The History, the Definition, and the Trends

LearnToBeAnAngelInvestor.com

Lesson 1 - excerpt from "Angel Investing: The History, the Definition, and the Trends"

What Defines An “Angel Investor,” or If This Is Private Business, Why Is The Government Involved?©

Congratulations on your willingness to explore Angel Investing as a strategic step toward success! This e-book series will provide you with excellent information on a full range of topics you’ll want to know more about as you begin your education in this exciting arena. This excerpt is free and is intended to provide you with an introduction to the concepts held within the first lesson/book of this Volume 1 and is available for purchase.

INTRODUCTION

To begin, do you know where the term “Angel” comes from? It comes from the early 1900's practice of wealthy businessmen investing in Broadway productions. Being the "sponsor" of a show carried prestige and potentially big returns that could be reinvested if the show was successful. Today’s sophisticated investors with high net worth (Angels) strive to continue their successful business track record by offering expertise, experience, contacts and money, to help companies succeed and grow. Your first lesson in Book 1, Angel Investing…The History, the Definition and the Trends, in Angel Investing covers some basic background about the history of Angel Investing, the market in which you plan to invest, the wide range of players, and the kind of money that’s involved in this high stakes game of investment.

The last decade has seen dramatic changes in the Angel investing process, resulting in significant growth in the amount of Angel money in the marketplace. In this first lesson/book, you’ll learn more about the key factors driving this dramatic shift in the nature and volume of private equity investing. Structured Angel networks became in vogue in the late 90’s and come in many forms, from managed funds to informal business and social membership organizations. The term “accredited” becomes very important as the process of selling equity is a regulated by the government, the full lesson explores whether you meet the definition of an Angel Investor, and about the important economic contribution of Angel Investors. You’ll also learn the statistical (and interesting!) results of the National Governors Association Center for Best Practices year-long study on entrepreneurship which convened in 2001. For example, according to the Center’s research, small, high-growth companies accounted for 70% of new jobs in the last decade. But, even with this kind of unprecedented growth, do you know the seven reasons why so many businesses still fail? As an Angel Investor, it’s important that you know these reasons which are listed in this lesson.

Government Involvement

For early stage companies, Angel Investors provide a valuable and approachable source of capital. Indeed the very term "Angel" investor gives the image of caring, generous souls eager to provide encouragement, advice and capital. Even with this benign impression, as with other investments, private equity investors are subject to federal and state securities laws. Lesson 1/Book 1 covers in detail what you need to know about why and how our government administers these laws (Security Exchange Commission) and its rules of exemptions 504, 505 and 506, what these laws do and how they work to your benefit. This is information that you’ll need as you work through the funding process with a prospective company, so that you can understand the rules of the game, what investment has been made prior to your introduction, and what follow-on investment will be needed.

Why Be an Angel Investor?

You’re probably wondering, “with Uncle Sam involved, is it worth it to be an Angel Investor?” Lesson 1 will provide the reasons why the answer is a resounding YES! We’ll share with you the insights of Robert Kiyosaki, best-selling author of the Rich Dad, Poor Dad books regarding wealth accumulation. For example, you’ll learn the difference between earned, portfolio and passive income, and how the rich get richer. You’ll also learn how you, as an Angel Investor, can achieve greater results than Venture Capitalists if you diversify your portfolio of private equity investments in the four ways shown in Lesson 1. You will also learn strategies to mitigate your risk as an Angel Investor in early-stage companies.

Not ready, want to see more from the book….

So, what kind of an investor are you? Let’s find out…

Definitions and Types of Angel Investors

Lesson 1 teaches you about "accredited" investors as defined by the SEC (accredited investor). The distinction between accredited investors and non-accredited investors is significant under the federal and state private placement exemptions discussed earlier in the lesson. You’ll want to read it in order to know what requirements are needed to confirm your status as an investor, and which type of investor you are.

For example, are you someone who can bring name recognition to the company and become a very positive factor as the company moves forward? You may be a Super Angel if you can do this, and if you have a net worth of greater than $5 million. Read about other Super Angels and their role in the company, in this lesson.

If you have a verifiable track record and can bring very specific experience to the new venture, and you want to "step into" an established company rather than create one, you may be a Super Active Angel. This lesson will tell you how much Super Active Angels typically invest and what they typically prefer to do to ensure the company’s success.

Are you an Active Angel? Active Angels invest in multiple companies in amounts between $20K and $250K. Read about others like you who want to "roll up their sleeves" and complete a task or a part of the strategic plan or for that matter, develop the strategic plan. Find out more in Lesson 1.

Passive Angels typically invest in through an Angel fund or structured network where they can follow a lead investment in which another Angel Investor they know and trust is taking an active role. Their investment ranges from $20K to $100K with a total portfolio in the $500K to $1M range. They want to be kept informed of all developments, and will become active as a Board member or will lend specific advice and counsel as the need arises.

If you simply wish to provide specific professional services such as legal, financial or consultative, and prefer to invest services in the company in exchange for equity, you may be a Professional Angel. Learn how this type of Angel needs to structure his/her involvement in the company in order to succeed, in Lesson 1/Book 1.

The world of private equity investing is challenging, yet rewarding. Congratulations on your willingness to educate yourself about this fascinating subject. The “Learn To Be An Angel Investor” lesson series is your first step toward your success. This was an excerpt of the first book of Volume 1 in the Learn to Be an Angel Investor Series.

To purchase the first book in this series click here:

To purchase the full 5 Book series "Inside Secrets to Angel Investing" and save over 50%:

http://www.kyrmedia.com

About The Author

Karen Rands is the founder of Kugarand Holdings ,LLC (www.kugarandholdings.com). She received her Economics Degree from Emory University and her MBA from University of Florida. After leaving a successful corporate management job at a high-tech company to scratch her entrepreneurial itch, she quickly realized there was a severe education gap. Investors seeking to embrace a wealth creation strategy that included private equity investment had little options to learn how to be an angel investor. Likewise, companies seeking capital to grow lacked knowledge of how to attract investors and to qualify for loans. Over the past 6 years she has developed a rapidly growing and successful consulting practice serving entrepreneurs, the LAUNCH Funding Network (www.launchfn.com) by connecting them with capital and resources. Further she acquired the long established Network of Business Angels & Investors (www.nbai.net) and turned it into the most active angel group in the Southeast and is poised for expansion in to other markets in coming months. Through her publishing house, KYRMedia (www.kyrmedia.com) she is sharing her knowledge of what works for the investors and the entrepreneurs and developing the curriculum necessary to educate a new generation of savvy Angel Investors and wise entrepreneurs through the education materials offered exclusively through KYRMedia. You get to be a part of that wave.

Disclaimer: Every effort has been made to accurately represent our products, their sources and their potential when applied by the student. Any information offered regarding actual earnings or examples of actual results can be verified upon request or the source can be made available. Purchasing equity in private companies is an extremely risky business. The information provided during the online orientation to Angel Investing is drawn from personal experience with Angel Investors and companies seeking funding, and from recognized authors and columnists, and is not intended to represent or guarantee that anyone will achieve the same or similar results. Each individual's success depends on his or her background, dedication, desire and motivation. As with any business endeavor, there is an inherent risk of loss of capital and there is no guarantee that you will earn a return on your investment.

This is an excerpt from Lesson 1/Book 1 of our Volume 1 “Learn To Be An Angel Investor” series. For the full Lesson 1, click here.

"Learn To Be An Angel Investor" is copyright protected and the information held within this website and the derivative content of the electronic courses are the sole property of Kugarand Holdings, LLC. You may not distribute it for financial gain without express approval from Kugarand Holdings, LLC. You may use the online material for educational purposes and link this and the Kugarand Holdings website to your website if you do not modify any of the content or credits.