12/18/14 | Uncategorized

Everything You Always Wanted to Know About Angel Investors (But Were Afraid to Ask)

Angel investors aren’t mythical creatures: they’re people! Learn more about who they are, what they need and what they’re looking for.

By Bonnie Boglioli-Randall (Contributing Writer, Women 2.0)

Angel investing is not what it used to be. Once largely the domain of the supremely wealthy and well-connected, the ranks of early stage investors have grown to include some 200,000 individuals who come from various industries and every corner of the country.

Despite these changes, the angel community remains strikingly homogeneous with regard to gender and ethnicity. Just 19 percent of angels are women, and female entrepreneurs continue to face an uphill battle in securing funding. While it’s easy to view the current state of affairs for women as a deterrent, many see the present environment as being ripe for opportunity.

Pipeline Fellowship

One angel group helping pave the way to greater diversity is Pipeline Fellowship. Since 2011, it has helped women of means enter the early stage investment ring and put their money behind female-owned, for-profit, socially responsible companies.

Drawing from an enviable list of accomplished applicants, Pipeline’s fellows meet two days per month in cities around the country for six months. In exchange for $4.5k and an additional $5k commitment to the fund, the women learn the ins and outs of investing before choosing a female-led social venture to back.

Decidedly more down-to-earth than their winged name suggests, these angels are breathing new life into the startup ecosystem and yielding returns in more ways than one.

What Angels Need

Some things never go out of style. Like cash, which remains requisite to becoming an accredited angel investor (the SEC sets a net worth threshold at $1M excluding primary residence and an annual salary of $200,000 or $300,000 if filing jointly).

Early stage investing poses inherent risk, so it’s also a good idea to have a stomach of steel that enjoys the roller coaster ride. Angels can put tens or even hundreds of thousands of dollars into a budding company in return for an equity stake, but assets can remain illiquid for years.

And then there are the companies that will inevitably fail. Conventional wisdom holds that angels seldom see profits, though recent research challenges that dictum. Nonetheless, diversification reigns supreme if you want to keep your skin in this game.

“Angel investing is high-risk and individuals should go into it knowing this,” says Natalia Oberti Noguera, founder and CEO of Pipeline Fellowship. She and her crew arm women with the information they need to make informed and impactful investments. “I like to say that it’s about being risk astute – not risk averse.”

Award winning broadcast journalist Adaora Udoji is no stranger to the sort of wild and bumpy ride that early stage investors participate in. Earning her stripes as a foreign correspondent for network and cable news, startups piqued her interest when she found herself co-hosting a budding radio show. She’s been drawn to the frenetic pace ever since.

“The startup business is raw and uncertain. It takes a certain kind of person who is open to the unknown ride,” says Udoji, a Pipeline alumna who now owns equity in several companies. “Building something new is fraught with unforeseen great and horrible milestones. It’s all so worth it when something goes right.”

Where Angels Come From

Angels do indeed walk among us, often moonlighting as investors while working day jobs. You pass them on your way to work, in line for your daily latte or even at your kid’s clarinet concert.

“I liked the idea of dedicating a small amount of time to a deep dive learning plan,” says current Pipeline fellow Anne Bradley who juggles her job as privacy counsel for Nike with her commitments to her family.

Wanting to leverage her history in IP law as a first-time angel investor, Pipeline appealed to Bradley’s penchant for social responsibility and her time-strapped calendar. “My schedule is quite busy, so I knew that the only way I was going to have a chance to pick up a whole new vocabulary and set of skills was by creating dedicated time.”

Grace Belangia is another Pipeline fellow who balances multiple duties. As Community Development Strategist for CONima and partner in early stage VC firm Sand Hill Endeavors, Belangia thrives in startup environments. She launched three as an owner in addition to investing, mentoring, and organizing TEDx Augusta.

“I wanted to take a more active role in supporting startups financially,” says Belangia. When Pipeline Fellowship extended its program to Atlanta this year, she jumped at the chance to participate. “I wanted the camaraderie of other women in similar places in their careers and lives to gain knowledge and connections.”

Where Angels put their Money

Angels can be found in every sector of the market. There is a tendency to couple the monetary wealth accrued in industry with professional skillsets to fund and support new businesses within their sector. But sector sometimes plays second fiddle.

While nearly one quarter of all angel investments go to software and internet businesses, there are ample dollars to be had in far reaching industries. Healthcare, for instance, ranks second in terms of angel investment favorability; when combined with social assistance, the sector also hosts the greatest number of women-owned firms.

Beyond industries, many of today’s angels seek to back companies with social or environmental commitments. To date, Pipeline fellows have funded a range of such companies including a B2B software startup for community gardens, plant-derived consumer products, and fair trade cocoa powder from the Caribbean.

Why Angels do it

Today’s angels increasingly focus on the impact they make alongside their financial return when considering an investment. Pipeline’s fellows balance investment considerations with their commitment to back women-led social ventures who typically face difficulty in obtaining institutional loans and venture funding. And that’s exactly where the opportunity lies.

“When we ‘pattern match’ to find entrepreneurs who we think will be successful, we’ll be less likely to discount the opportunities presented by other women,” explains Bradley. “In light of the evidence that companies led by women often outperform their peers, I think we’re uniquely situated to take advantage of that blind spot in the market for investment.”

Udoji echoes the sentiment. “It seems like there are a growing number of entry points for women, and that’s exciting because we bring different perspectives to both the entrepreneurial and investing sides.

“No matter what your background, no matter what your skills, if you want to jump into this world you will immediately add value,” says adds. “I say to any woman who wants in, come join us.”

Are you seeking support from an Angel Investor?

Photo credit: Cranach via Shutterstock.

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