University of New Hampshire Professor William Wetzel coined the term "Angel Investor,” taken from the early 1900’s practice whereby wealthy businessmen would invest in Broadway productions. Today "Angels" typically offer expertise, experience and contacts in addition to money.

Angel investors are individuals who invest in businesses looking for a higher return than found in traditional investments, and who often relish the thought of being a coach, a hands-on team member, or giving something back to the community. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground. Angels usually provide the bridge capital from the self-funded stage of the business to the point the business qualifies for the level of funding provided by professional venture capitalists (VCs). An Angel “round” of financing is typically $150,000 - $ 2 million. Professional VCs average $10 - $14 million per round, mostly in later stage companies, though a relative handful of seed stage VCs will fund smaller, earlier amounts.

With more than 2,500,000 individuals in the US with a net worth in excess of $1 million, it is estimated that there are perhaps 400,000 active angel investors in the US alone, funding 50,000 businesses per year. By comparison, professional venture capital funds about 5,000 companies each year. The total Angel investment per year is estimated at about $40 - $100 billion, about twice the total of all professional VCs.

The Center for Venture Research, which performs research on angel investments, has developed the following profile of angel investors:

The "average" private investor is 47 years old with an annual income of $90,000, a net worth of $750,000, is college educated, has been self employed and invests $37,000 per venture.
Most angels invest close to home and rarely put in more than a few hundred thousand dollars.
Informal investment appears to be the largest source of external equity capital for small businesses. Nine out of 10 investments are devoted to small, mostly start-up firms with fewer than 20 employees.
Nine out of 10 investors provide personal loans or loan guarantees to the firms they invest in. On average, this increase the available capital by 57%.
Informal investors are older, have higher incomes, and are better educated than the average citizen, yet they are not often millionaires. They are a diverse group, displaying a wide range of personal characteristics and investment behavior.
Seven out of 10 investments are made within 50 miles of the investor's home or office.
Investors expect an average 26% annual return at the time they invest, and they believe that about one-third of their investments are likely to result in a substantial capital loss.
Investors accept an average of 3 deals for every 10 considered. The most common reasons given for rejecting a deal are insufficient growth potential, overpriced equity, lack of sufficient talent of the management, or lack of information about the entrepreneur or key personnel.
There appears to be no shortage of informal capital funds. Investors included in the study would have invested almost 35% more than they did if acceptable opportunities had been available.

Angel investors play an important part in the investment "food chain." They provide equity investments in the form of "patient capital," making illiquid investments, expecting a return realized in full four to seven years hence. They fill the critical "Equity Gap" between the "3-F's:" (Friends, Family, and some would say, Fools) and professional VCs. They provide expertise, experience, contacts, clout, and passion on behalf of their investee companies.

For the business seeking funding, the right angel investor can be the perfect first step in formal funding. It usually takes less time to meet with an angel and to receive funds, due diligence is less involved and angels usually expect a bit lower rate of return than a venture capitalist. Structuring the relationship carefully is an important step in the process.

The role of an Angel Investor Group or Network, such as the Camino Real Angels, is to collaborate for sourcing, screening, and evaluating deals, while providing greater shared financial leverage and a deep pool of supporting resources. There are nearly 100 Angel groups operating in the US, from casual associations of individuals, to rigorous pooled investment clubs.

The Camino Real Angel Network seeks to make investments along the historic Camino Real ("Royal Road") corridor, stretching from El Paso, Texas, winding through Las Cruces, Albuquerque and Santa Fe, New Mexico. Investors must be "Qualified Investors," generally those individuals having at least $1 million net worth, or two immediate past years in which personal income exceeded $200,000. annually. Angels will make individual, not joint decisions, though each successful presenter is expected to attract multiple angel investors. Currently, meetings are held quarterly.

For more information, email us at info@caminorealangels.org

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