Identifying the Different Types of Angel Investors

Angel investors are often defined as investors ready to provide money to new companies before the founders may get venture capital funding. Angel investors are often high-net-worth individuals who own businesses, however this is not always the case. Individuals, angel groups, and early-stage venture capital firms may provide seed finance to validate a concept or qualify a start-up for funding. Following that, a small selection of angel investors, angel groups, and early-stage venture capitalists may offer start-up funds to complete product development and initial marketing. Then, venture capitalists may provide a first round of investment to begin full-scale production and sales, followed by a second or third round of funding to help the company grow or break even.

The following are several distinct categories of angel investors: 

Guardian Angels

Guardian angels are engaged investors who mentor and coach the management group to advance the business. They typically devote a lot of time to the business and only work with a select few start-ups.

Professional Entrepreneurial Angels

Professional entrepreneurial angels frequently follow the advice of other angels they respect and whose judgment they trust when making investments. Despite frequently investing outside of their area of expertise, they have entrepreneurial experience.

Operational Expertise Angels

Senior executives in large organizations in the start-up’s target industry are considered operational expertise angels.

Financial Return Angels 

Financial return angels are typically high net worth individuals who invest in businesses in which they have little prior industry understanding and who have little relevant entrepreneurship experience. They frequently acquired their wealth from investments in stocks, real estate, inheritance, and professions unrelated to business startup.

In their search for investment opportunities, angel investors turn to a wide range of professionals, including law firms, accountants, consulting firms, and even venture capitalists. Experienced angels, however, are frequently less willing to accept proposals from entrepreneurs directly unless they have set criteria and well-defined transaction screening processes. As a corporate law firm in Miami, we help clients with developing and revising business plans, financing, and capital-raising strategies, as well as introducing them to strategic partners, angel investors, and specialists who can assist them in establishing and defending their businesses.

If you or your business needs legal advice, contact an M&A Attorney in Miami for help.