Source and extent of funding Angels typically invest their own funds, unlike venture capitalists who manage the pooled money of others in a professionally-managed fund.[7][8] Although typically reflecting the investment judgment of an individual, the actual entity that provides the funding may be a trust, business, limited liability company, investment fund, or other vehicle. A Harvard report[9] by William R. Kerr, Josh Lerner, and Antoinette Schoar provides evidence that angel-funded startup companies have historically been less likely to fail than companies that rely on other forms of initial financing. Angel capital fills the gap in start-up financing between friends and family—(sometimes humorously given the acronym FFF, which stands for friends, family and fools)[10] who provide seed funding—and formal venture capital. Although it is usually difficult to raise more than a few hundred thousand dollars from friends and family, most traditional venture capital funds are usually not able to make or evaluate small investments under US$1–2 million.[11] Thus, angel investment is a common second round of financing for high-growth start-ups, and accounts in total for almost as much money invested annually as all venture capital funds combined, but into more than 60 times as many companies (US$20.1 billion vs. $23.26 billion in the US in 2010, into 61,900 companies vs. 1,012 companies).[12][13] There is no “set amount” for angel investors, and the range can go anywhere from a few thousand, to a few million dollars. In a large shift from 2009, in 2010 healthcare/medical accounted for the largest share of angel investments, with 30% of total angel investments (vs. 17% in 2009), followed by software (16% vs. 19% in 2007), biotech (15% vs. 8% in 2009), industrial/energy (8% vs. 17% in 2009), retail (5% vs. 8% in 2009) and IT services (5%).[12][14] While more readily available than venture financing, angel investment is still extremely difficult to raise.[15] However some new models are developing that are trying to make this easier.
Posted on: Wed, 05 Mar 2014 00:41:00 +0000
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