The Many Types of Angel Investors in 2021

There are several key types. Let’s break them into several categories:
  • Professional vs. non-professional. Professional angels generally have very specific criteria in terms of valuations, team make-up, check size, etc. You do need to ask and listen to what their sweet-spot is. Non-professional angels often shoot from the hip or fish with a wider net.
  • Lead vs follow. This is critical. 90%+ of angels just want to “follow” someone that sets the terms, price — and does the due diligence and hard work. It’s so, so much easier to follow. But you at least need a strong lead to get the ball rolling.
  • Valuation sensitive vs. less sensitive. Many traditional angels are very sensitive to price. You can see this on Shark Tank. They want to invest a fixed amount of capital, into a specific number of companies, and own a certain amount of each. But other types of angels may care a bit less about price. This can range from family members, to very rich individuals (price is immaterial to them), to corporates investing for other reasons. Listen and ask.
  • Can — and can’t — afford to lose it. Ask — and find out. A professional investor typically won’t put more than 2% of their total investable capital in any one investment, at least not at first in the first check. And they will rarely invest more than 10%-20% of their total net worth in true angel deals. If someone is putting way too much of their life savings into an angel investment, maybe don’t take their money. Way too stressful for everyone. A true angel can lose 100% of any given investment and not care that much. They are hunting for that 1 out of 50 that gives them a 100x+ return. The others don’t need to.

A deeper dive here: What are the economics of angel investing? | SaaStr … and a list of flags and issues to spot here: 7 Signs an Angel Investor … May Really Be a “Devil” Investor | SaaStr

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