Angel Investing: Matching Start-Up Funds With Start-Up Companies

The Guide for Entrepreneurs, Individual Investors, and Venture Capitalists

by Mark Van Osnabrugge and Robert J. Robinson

Angel Investing: Matching Start-Up Funds With Start-Up Companies by Mark Van Osnabrugge and Robert J. Robinson gives useful information about angel investors and venture capitalists.

Van Osnabrugge and Robinson estimate that angel investors--wealthy individuals who invest their own money into start-up companies--invest three to five times more money than venture capitalists and back thirty to forty times more ventures, making angel investors the primary source of external capital for entrepreneurs.

But, how do you meet and present your business idea to an angel investor? What factors do angel investors give the most weight to when debating whether or not to fund a venture? How do you know if an interested angel investor is the angel for you and not some devil just waiting to take over your new company? How do angel investors differ from venture capitalists when valuing a start-up company?

Angel Investing answers these questions and many more. It is stuffed with studies, interviews, and solid advice. Angel Investing can be divided into three main categories:

• General background about angel investors and venture capitalists and their relationship and importance to business and the economy.
  
  
• Practical advice for entrepreneurs seeking start-up funds from angel investors or venture capitalists.
  
  
• Practical advice for individuals considering becoming angel investors and making investments in small companies.
  
  

Each topic in Angel Investing is well documented. It's a rather formal book, actually. Robinson is a professor at the Harvard Business School and Van Osnabrugge is a former fellow of the Harvard Business School.

I found the section about successful angel investment deals a bit too rich for my taste. For example, we learn that one angel investor who backed amazon.com got a 260 times return on his initial investment of $100,000 making him $26 million. Another angel who invested in the Body Shop and received 10,500 times his initial investment. As a new angel investor, don't get overly excited about the prospects! Remember, many angel investments fail dismally. As the authors point out, you must only invest money you can afford to lose!

Angel Investing helps entrepreneurs understand the little-known world of angel investors and venture capitalists. Also, if you are already a financially successful entrepreneur who considers becoming an angel investor, you definitely will want to read Angel Investing: Matching Start-Up Funds With Start-Up Companies to help improve the chances of making successful angel investments.

Of course, reading a book won't automatically put you in contact with serious angel investors, and much of the real work in financing a new venture involves finding personal contacts to introduce you to appropriate angel investors. Van Osnabrugge and Robinson notice that most funded ventures involve personal introductions. If you'd like to read more about Angel Investing, I wrote a column based upon this book.