First Money Into the Deal
After you get your initial friends and family funding, Angel Investors are the first checks written by “outside” investors in a company. They tend to be the first professional capital into a deal, but they are also looking to trade the risk of being in early with the reward of getting more equity (stock).
Later on as the company gets larger and their capital needs are greater, the amount of money an angel can invest doesn’t yield a very big percentage of the company, so effectively their money becomes less valuable. This is why angels are so consistently found early in a company’s formation.
Typical Deal Sizes
Angel Investors can invest as much as their wallets will support, but a their typical check sizes will be less than $500,000 in most deals, and can be as little as $5,000 depending on the opportunity.
As you start to cross the $500,000 mark, or even near that mark, you begin to get into a situation where angels will band together with other angels (sometimes in an Angel Investor Group) to help spread the risk across numerous investors.
They are “Investors”, not “Angels”
With a name like “angel’ there’s sometimes an expectation that these investors are looking to make charitable investments. That’s entirely not the case.
Angel investors are regular people just like you, albeit probably with more money. But they want to get a return on their investment like anyone else. If your company is losing tons of money or is in a terrible financial position, they don’t want to bail you out. They are not there to save you – they are there to make money.
These investors may look to take a chance on your idea, but they are only going to so if you are extremely well prepared. They don’t just hear an idea and decide to write a check. Anyone walking around with a check book in hand that has money to spend is getting pitched non-stop by people to write a check. Instead, they want people that represent a solid investment that they can feel confident will make a return.