Successful start-ups are typically more scalable than established businesses. They can potentially grow rapidly with limited investment of capital, labour or land.
Technology, and in particular the internet, has allowed businesses to move from concept to start-up to internationally scalable for a much lower cost and in a fraction of the time compared with just a few years ago.
Angel Investing takes advantage of this changing dynamic – to invest earlier and in smaller amounts in high growth businesses.
A History of Angel Investing
Angel investors are not a new phenomenon. They have provided early stage capital and advice to would be entrepreneurs for as long as people have collaborated to form commercial enterprises.
The term angel investors can be traced to the beginning of the era of Broadway Productions – a bunch of investors sat in somebody’s living room while somebody like George Gershwin pounded out an overture, six or seven new tunes and a finale. The investors, a.k.a. angels, promptly clamoured for a piece of the action, slapped down their checks and before you could say “Jack Barrymore,” there it was. Another opening, another show.
For an interesting historical article on Broadway angels read “Being an Angel is Fun” from The Modesto Bee 1954.
In 1978, William Wetzel, then a professor at the university of New Hampshire and founder of its center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the USA, and he began using the term “angel” to describe investors that supported them.
Angels provide capital, experience, technical and operational advice, mentor managers and open their valuable network of industry contacts – they are ACTIVE investors.
Angels fill the capital raising gap between “friends & family” and venture capital.
Angels provide an important source of capital to entrepreneurs who are engaged in developing and commercializing innovation. This role is central to an economy’s competiveness and these entrepreneurs are major contributors to growth in a region’s productivity, wealth and jobs.
Angels have been crucial in the genesis of many modern day corporate titans, as well as many businesses that fail. The willingness of Angel investors to take risk drives an economy’s innovative characteristics and economic vigour.