Joe Johnson, Ph.D.
Entrepreneur. Investor. Startup Expert.
There are new angel groups cropping up everywhere. When selecting one to join, it’s important to examine not solely the bare requirements, but to consider whether the group invests in companies matching your interests. Here’s what you need to know about angel groups and how to find one that’s right for you:
Why You Should Join an Angel Group
Angels aren’t required to join a group, although joining one does offer a range of benefits. For individuals just getting into angel investment, an angel group can help familiarize you with the process and provide access to a rich pool of knowledge and experience – often spanning relevant topics beyond the strict confines of angel investing. Depending on the specific group that you opt to join, you may find yourself amidst other individuals with the same sort of industry experience (e.g. a group focusing on healthcare startups) or with a group boasting a range of varied expertise, thereby affording you the opportunity to learn more about other industries.
Additionally, membership in an angel group can provide a time savings. Finding potential targets and performing the necessary due diligence can constitute a time-consuming chore. With more individuals working toward the same goals, that investment of time is spread between members. This enables groups to investigate a greater number of potential targets than would otherwise be possible for an individual working alone.
The primary goal of many angel investors is to help entrepreneurs get their innovative ideas out into the real world. Angel investors often step in where venture capitalists won’t – in a company’s early seed stage when financing is crucial for so many endeavors. When investors work in a group, they can pool their money, thereby resulting in each individual investment being larger than any particular investor might otherwise be willing to make on their own. Members of an angel group each tend to make smaller investments when compared with those not in a group, yet, because the money is pooled, each business actually receive more net funding. The ability to write small checks while still creating a large impact means that angel investors working in a group can write more checks and help more startups.
Accordingly, angel groups are often approached by entrepreneurs which directly helps to give them early insight into possible opportunities.
All of these factors combine into the overall possibility of better returns when investing as part of a group. The increased knowledge and experience base, the variety of opportunities, the ability to more easily diversify, and the option to write smaller checks to a greater number of startups equates to group members increasing their collective likelihood of a positive return.
Responsibilities of Joining an Angel Group
Be assured, however, that membership isn’t as simple as merely showing up to an angel group meeting with your checkbook. All angel groups mandate specific requirements for their members:
Being part of an angel group means that you will likely be expected to help with group activities such as sourcing deals or performing due diligence. Thankfully, because all members are contributing their individual efforts, these tasks often represent less total work than one might reasonably expect to do on their own.
Most angel groups hold regular meetings. Frequency will vary between groups, although there is generally a requirement that a member be present at a set number of meetings.
Some groups require the payment of a membership fee. This may serve to limit membership numbers and to ensure that group costs are adequately covered.
Angel groups frequently require member angels to invest either in a certain number of deals each year or a minimum amount of money. For example, some groups may require members to take part in no fewer than three deals per year, while others may require members to invest a minimum of $10,000 per annum.
Locating an Angel Group
The best way to locate an angel group is to ask individuals in your circle about their own group memberships. Most angel groups are invitation-only, so it’s most often necessary to be acquainted with an existing member.
That said, there are some groups that do accept applications, which helps them to reach a broader base of potential angel investors sharing a similar goal. For example, groups focusing on female-led businesses or social entrepreneurship may be more likely to have an application process. Even then, final membership approval is generally determined by the group and an invitation will be issued to join once that approval has been secured.
To locate potential angel groups, begin with your region. The Angel Capital Association has a list of their member groups by region which can make the process of finding a local group somewhat easier. If I were seeking such a group, I’d first look at the Southeast Region, which includes Florida. As there don’t currently appear to be any listed near me, my next step would be to Google “Tampa Angel Investor Group” since Tampa is a relatively large city within easy driving distance. If I don’t find one there, I might even consider Orlando, so long as the meeting frequency requirements aren’t too onerous.
Once you’ve located a few groups in your region, the next step is to analyze their mission. In some regions, you may find a concentrated number of groups, while other regions are more sparsely populated. You should consider each group’s mission and area(s) of focus to determine whether (and how well) their investment goals align with your own. Some groups make a point of supporting female-led businesses, while others focus on the healthcare industry. So, for example, if your goal is to invest in socially-conscious businesses, you should locate a group which shares that interest – so as to be better assured that you’ll be presented with more opportunities to invest in appealing companies.
When investigating angel groups, a brief look at each one’s “About Us” page should provide you with information regarding membership and whether the group accepts applications.
If you can’t find an angel group in your area or if you can’t locate one specializing in your industry, why not start one? The Angel Capital Association shares information for starting an angel group here.
Angel investors have a great deal to offer from both the business and innovation perspectives. When we work together in groups, we’re better able to help startups prosper as we invest in a greater number of companies.
About the Author
Dr. Joe Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.