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 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 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!
If you are already a financially successful entrepreneur who considers becoming an angel investor, you might want to read "Angel Investing" to help improve the chances of making successful angel investments. However, the book is not a complete analysis of the due diligence process.
And, of course, from an entrepreneur's standpoint, 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 note that most funded ventures involve personal introductions.
Maybe, if you're ready to invest $50,000 per company or more (and ready to lose $50,000 or more per investment!), you're tired of investing in public companies (with mystic accounting and lack of reportability to the investor), and you want to add value to your investment by contributing information and contacts to your investment, this might be a good book to help get you started. On the downside, you'll probably have no diversification and poor liquidity with angel investments.
The most important tip from "Angel Investing": Do adequate research before investing in a company. And, it's best if you know the industry and know business.
Peter Hupalo, Author of "Thinking Like An Entrepreneur."
