Not all angel investors are the same. In fact, there is an incredible amount of variety among angel investors. Some angel investors are one-off investors that invest based on how much they know and trust you. Other angel investors make dozens of investments per year and are very sophisticated. Still other angel investors write $1-10 million checks into hot Series A and B rounds. This is just scratching the surface of how disparate angel investors can be.
It’s critically important, however, to understand this variability in backgrounds, motivations, and investment styles because you need to be focusing on those investors that are the best fit for your company and the opportunity to invest in it.
As I’ve said before, fundraising is sales, and the fundamental tenant in sales is to focus on your ideal customer–or those folks that are most likely to buy. You will waste an enormous amount of time and energy if you are pursuing investors that are not a good fit, and that is the most likely reason that your fundraise will not succeed.
Let’s dive in and learn a little bit more about different angel investor types or archetypes.
2.1 Aspirational Angels
One way that angel investors vary is by how often they invest, or their activity level. This can range from never having made an investment to dozens of investments per year. You might be tempted to think that it’s easiest to get investment from super active angels, but that is rarely the case.
There are scores of wealthy individuals that have never written a check in their lives. I call these folks “aspirational angels.” It doesn’t mean that they are not likely to invest in your company, however.
They might not have yet made an angel investment for a variety of reasons. Perhaps they just never saw an opportunity that resonated with their interests or personal mission. Or they might want to make their first angel investment but are intimidated by the process of making and managing an investment. It might be that they don’t even know that they would be excited to make an angel investment in a company like yours because they’ve never really considered it.
These kinds of angel investors might be folks like your dentist or your former boss. What is important to understand is that you not only have to present your opportunity to them, but you will likely also have to help educate them and connect them with resources to enable the process. These resources might include templates for evaluating investment opportunities, templated investment documents, even courses for aspiring angel investors.
The good thing is that these kinds of angels are not on many other founders’ radars, so there is a lot less competition for their attention and money. This can be a real positive as you consider on whom to focus your efforts.
The downside is that new angel investors might require a lot of hand holding to both make their investment and post-investment. Investing at the earliest stages of a startup, when it’s just an idea or just starting to grow, can be an extremely risky proposition, and investors might lose all of their money. Novice angels are not as comfortable with this outcome and might really be on your neck if things start to go south.
2.2 Sleeper Angels
Similar to aspirational or novice angels, sleeper angels do not make many investments, but they might have a small handful under their belt. Because they have gone through the process a few times, they are familiar with the risks and maybe a little more measured when your company goes through tough times.
Sleeper Angels also are more comfortable with the actual investment and management process since they’ve been through it already, so there is less handholding and education that needs to happen. They might even have refined their investment focus and diligence process, so they can tell you much more quickly if your company might be of interest or not.
In my opinion, sleeper angels are certainly worth keeping in mind because they are easier to work with but also not flooded with as much interest as active angel investors.
2.3 Active Angels
As the term suggests, active angels make many investments consistently. They might make a few or even dozens per year. Their part-time or full-time job might be angel investing. These angels might even market themselves as angel investors by appearing on podcasts, writing articles in popular publications, and being featured in events on panels, etc. They sometimes have a website dedicated to promoting them and their angel investing.
One thing that is very different about active angels is that they often have a lot more deal flow than less active ones. That’s jargon for “they see a lot more potential investments” than others.
The benefit of approaching an active angel is that they are very well versed with making and managing investments. That means that they will likely be a lot faster to a “yes” or a “no.” However, there is often a lot more competition for their attention and money, even for smaller local angel investors.
2.4 Super Angels
A key factor that might be significantly different about these angels is that they have much more capital to invest. Angels that are able to write big checks such as $5 million into Seed, Series A, Series B and higher rounds are called “super angels.”
Popular angel investors such as Jason Calacanis, Alexis Ohanian, and Mark Cuban often participate in big funding rounds ($5-30 million) and operate through formalized business entities that make the investment and manage them post-investment. In fact, they might even be staffed with a team of investors and operators. In essence, these super angels often operate like venture capital firms.
Obviously, the competition for investment from super angels is orders of magnitude greater than for other active angel investors. In fact, you might be better off pitching a less well-known VC fund than a super angel. Moreover, it’s almost required that you get an introduction to super angels, and their networks are extremely difficult to crack into.
2.5 Ultra High Net Worth Individuals (UHNWI) with Investment Advisors
Some folks have amassed or inherited a considerable amount of wealth. Those that have more than $30 million in assets are called Ultra High Net Worth Individuals or UHNWI. Their level of angel investment can vary greatly from never having invested to being a super angel, with most falling somewhere in between.
What is often unique about UHNWIs is that they often employ wealth advisors to help them manage their wealth and make investments in public stock markets, real estate, private companies, etc. The challenge is that these wealth advisors essentially act as gatekeepers, and they are incredibly good at it.
It makes sense. The wealth advisor’s main function is to preserve their clients’ wealth, which means that making risky bets such as investing in very early stage companies is very much frowned upon by their kind. It is often impossible to get by wealth managers, and the only way to truly get on the principal’s radar is to work with them directly.
UHNWI are often local entrepreneurs that have enjoyed tremendous success. The key is to find a way to get on their radar rather than in their wealth manager’s inbox. Once the principal is bought in, the wealth manager will take over diligence, making the investment, and managing their investment post financing.
2.6 Single and Multifamily Offices
In terms of mysterious, opaque worlds of investors, none is more underground than family offices. Family offices are formalized investment arms of very wealthy individuals, often in excess of $100 million net worth. The family office is a formal entity that manages all kinds of investment activity for the principal. Single family offices will manage the wealth of one family, whereas multifamily offices will manage the investment activity for multiple families, as the names suggest.
The challenge of getting investment from family offices is twofold. First, the principals are usually very high profile individuals due to their wealth and social status. That means that they usually try to stay as much under the radar as possible, and so their family office is hard to find and connect with. Unlike other UHWNIs, the principals around whom these family offices are formed are almost impossible to connect with directly, and you are probably better off dealing with their family office staff.
Second, the principals’ wealth is often so vast that it is impractical for them to make relatively small investments. Their minimum investment amount might be $1 million or more, which would be nice, but probably beyond the stage of most angel-round stage companies.
About the Author: Sergio is Managing Partner at Beta Boom, a pre-seed and seed fund investing in startups building the future for women, ethnic minorities, immigrants, and rural populations. His personal mission is to level the playing field for underestimated founders and empower them to build huge, impactful businesses.