How to Become an Angel Investor

Written by Peter Tran

July 28, 2017

s defined in Securities ct of 1933, n angel investor is n cedited investor
who hs n individul or joint net worth tht exceeds $1 million t time in
which n investmt is mde. y re lso individuls who hve personl income
of t lest $200K in ech of two most rect yers of investmt or hve joint
ccount in excess of $300K in ech of those yers, nd will hve sme expected
income level in currt yer. Angels invest ir own personl welth in erly-stge
(seed nd strt-up) compnies.

Severl decdes go, word “ngels” referred to people who ed
fund Brdwy tertinmt. However, in tody’s business world, term
“ngel investors” tkes on whole new mening. Ft used by Willim
Wetzel, former director of Cter for Vture Reserch t University of
New Hmpshire, mny entrepreneurs view ngel investor funding s “ from
hev” becuse of opportunity to finnce ir erly stge terprises.

resons why mny welthy individuls wnt to become angel investors vry considerbly.
Some people seek mens to employ mselves, while ors wnt to ete jobs
for ir fmilies nd ir future gertions. Some relly joy ing or
strt-ups succeed, while ors simply hve hedonistic pprch to investmt,
tking plesure in risk-tking in compny’s success. In ddition, re
re those who re only interested on economic gin nd rte of return on n
investmt. Regrdless of reson, mny ngels shre few things in common:

To become n angel investor tkes more thn just personl welth for desired investmt.
ccording to Howrd H. Stevson, Srofirm-Rock Professor of Business dministrtion
t Hrvrd Business School, “reding business plns, studying in business
school t ngel seminrs, nd lerning n industry by working in it” re wys
tht “one cn develop expertise tht will promote success in investing.”
For both trepreur nd ngel investor, Stevson clims tht “re
is nothing like doing it,” referring to working nd hving experice in
giv field.

In ddition to hving experice, angel investors should lso define ir personl
nd finncil gls, nd invest with those who hve solid trck record wh ssessing
ny pottil business opportunities.

Willim Shlmn nd Howrd Stevson, from Hrvrd Business School, hve
proposed bsic frmework for ech investmt opportunity/trepreuril evlution
s three-sided model in which four vitl componts re orgnized nd well-interconnected:

Not only is ech individul compont ucil for successful investmt, but
wy y interct is lso just s ificnt. high-pottil business opportunity
occurs wh re is right rrngemt or combintion of ech elemt, wheres
poorly rrnged/combined elemts or lck of one or more of se esstil componts
will led to filure. Hrvrd Frmework is s follows:


PEOPLE- refer to ny ificnt stkeholders of compny, including
trepreur, tem members, investors, dvisors, etc.

POTTIL BUSINESS OPPORTUNITY- refers to business proposl/pln,
consumer, size of business, etc.

CONTEXT- refers to externl fctors tht cn
success of business, including industry trds, stte of economy, consumer
supply nd demnd, technology developmt, etc.

DEL- refers to contrct betwe n trepreur nd n angel
, including terms, greemt nd pricing.

re re five requiremts tht Mich Bldwin, n angel investor who sold his SEO
consulting compny, looks for in every business opportunity:



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