Angel investment groups come in many flavors. Does it matter to know the different types? Potentially, yes:
as an entrepreneur aiming to pitch, knowing whether an investor is a network or fund can help you understand if you are a good fit for each other
as a potential investor evaluating the different types of angel investment methods, knowing how local options work is key
as a community thinking about forming a group, understanding the different options can help you design a platform that can be successful, and sustainable, in your location.
So, continuing our angel investing “back-to-basics” series, here is our outline of the different flavors of angel investment groups.
VentureSouth is a network of angel membership groups, run by a professional team, whose members meet in person to help individuals invest their own capital in early stage companies across the southeast.
This is what each of the terms in bold mean and how they might be changed.
Network vs. single group. Some groups are “single groups” that operate independently. Other groups band together in “networks” of groups and operate more collectively – from mostly autonomous groups to centrally-coordinated “firms.”
Angel membership groups vs. committed capital funds. Some entities are committed capital funds – meaning investors fund a pot upfront and then decide how to invest it over time. An investor might have to invest at least $25,000, which gets invested over 2-5 years. Other groups have a membership model where people join the group first and later make investments if they choose.
Professional team vs. volunteers or member-led. Some groups are led by part-time volunteers, often drawn from their members. Others are led by full time professionals.
Meeting in person vs. online / virtual. Some groups are “virtual” platforms where investors pitch by video and diligence is conducted online. Others (like us) require pitches by entrepreneurs to investors in person and conduct due diligence face-to-face.
Individuals’ private capital vs. public money, grants, etc. Most angel groups invest money that come from individuals investing their own money. Other entities are funded by the state or some other public, grant, or corporate entity.
Early stage companies vs. seed funding, or venture capital. Some groups invest $10k-$50k in ideas; others (like us) invest $250-500k in early-stage or companies “going to market”; others invest in later stage “growth” rounds of $2-10M. (The terminology here is not very precise. “Seed” to us means “before an angel investment,” but “seed” can mean “a small VC round” or “an angel round.”)
Across the southeast vs. locally-focused. Some angel groups (especially online platforms) will invest anywhere or cover a national geography. Others are very focused on a small area. Most are interested in a 2-4 hour driving radius of their center.
When you factor all these together in combination (and add it how due diligence is organized, how often groups meet, how active they are, how the fees work, how the actual investments are executed, and many more) you can see how groups can vary significantly. Just in Charlotte alone, as William Bissett discussed last year, there are different flavors to sample.
Some nearby examples:
Single group: Atlanta Technology Angels in Atlanta
Fund: Piedmont Angel Network in Greensboro
Seed stage: Pinnacle Enterprise Fund in Asheville; later stage: Bull City Ventures in Durham
We’ll provide our thoughts on the pros and cons of different groups in future posts.