Angel Investors Essay

3781 Words Jun 29th, 2014 16 Pages
MIT Course 15.975 Nuts and Bolts of Business Plans Session on Financing Excerpts from Angel Investor Study

Venture Support Systems Project: Angel Investors

MIT Entrepreneurship Center

Release 1.1 February 2000

The Venture Support Systems (VSS) Project is managed by a team at MIT and HBS. It was funded by a generous donation from Ronald A. Kurtz (MIT 1954) and David Kurtz (HBS 1992). Other reports from the VSS Project include cases, teaching notes and monographs. This report was prepared by Lucinda Linde (Marlin Capital) and Alok Prasad (Pittiglio, Rabin, Todd & McGrath) under the direction of Kenneth P. Morse and Matthew Utterback of the MIT Sloan School and Howard Stevenson and Michael Roberts, of the Harvard Business
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Some of the key findings of this study are: • Angels vs. Early Stage Venture Capitalists: The motivations and operations of experienced angel investors are typically different than those of early stage venture capitalists. First time entrepreneurs can benefit from approaching experienced angel investors, prior to meeting early stage venture capitalists, when seeking early stage funding. This study outlines the differences. The “Network of Trust”: An angel’s personal network of contacts is a key element in screening deals, conducting due diligence, negotiating terms, adding value after the investment, securing additional rounds of funding and executing the exit strategy.

• “Not All Angels are Alike”: It pays for entrepreneurs to understand the type of angels they need and the role that the angels will play in building their company. We have categorized angels into four groups: Guardian Angels, Operational Angels, Entrepreneur Angels and Financial Angels. We describe how these various angel types operate and how they provide different value to emerging ventures. • Systemization is on the Rise: Experienced angel investors are becoming increasingly systematic in their operation. Systematic evaluation and analysis help reduce risk, improve returns, and increase the number of deals considered. The Need to Clarify the Angel Investing Process and Terms & Conditions: We found wide variation in the way angel investors conducted the

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