What You Need to Know About Angel Investors

Startups need funding to get their ideas off the ground. An angel investor is an individual, or a group of individuals, who invests their own money into an early-stage startup, usually in exchange for equity, mentorship, and the chance at outsized returns if the company succeeds. While innovation and great products are important, without funding ideas don't have enough support to grow and flourish. That said, startups have come up with solutions to get the funding they need, and connecting with angel investors is one of the most common.

If you're considering angel investors as a funding source, you're in the right place. We're going to take you through everything you need to know about angel investors. We'll cover what they are, how to find them, and show you some well-known angel investors.

Read on to learn more below.

What is an Angel Investor?

Angel investors are individuals or groups who invest in startups with their personal resources. While angel investors provide financial assistance, they will also mentor founders and help with staffing. Angel investors have a vested interest in the success of a startup company to get a return on their investment. You can browse angel investors in AngelMatch's database to see the range of people investing this way today.

In most cases, angel investors invest in companies for equity in the company. When the startup grows in value, investors choose to keep their money in the startup or they will convert it to equity and remove it from the company. Depending on the startup and the investor, the investment strategy often changes.

When do Angel Investors Invest in Startups?

Angel investors invest in startups before venture capitalists and larger firms. It's common for angel investors to invest in startups during the seed round of funding.

A seed round of funding is a round of fundraising where startups secure capital to forge a working business plan, market products, and launch a product. Some angel investors will also invest in the pre-seed round of funding. However, investments in the pre-seed rounds are rarer.

How Much Do Angel Investors Invest in Startups?

Angel investors typically invest between $50,000 and $250,000 of their own money into a startup, often during the seed or pre-seed round. Some angels also invest through venture funds they help run, which can involve much larger checks than a typical personal angel investment.

Overall, the amount an angel investor puts in depends on the company, the round, and how much capital that investor has available to deploy.

What's the Difference Between Angel Investors and Venture Capitalists?

The difference between angel investors and venture capitalists is that angel investors aren't affiliated with investment firms. On the other hand, venture capitalists are a part of a larger firm that pools money to invest in new companies. There's more paperwork and red tape when working with venture capitalists because of this reason.

Ultimately, that's the main difference between angel investors and venture capitalists. If you want a fuller breakdown of fundraising terms like these, AngelMatch's startup fundraising glossary is a good next stop.

Who are Some of the Best Angel Investors?

The best angel investor depends on your startup and how much funding you need. However, some angel investors have a long, well-documented track record. We list some of the most notable ones below.

• Jeff Clavier

• Dave Morin

• Keith Rabois

• Ron Conway

• David Lee

Jeff Clavier

Jeff Clavier is the founder of Uncork Capital (formerly known as SoftTech VC), a Silicon Valley seed-stage venture capital firm. Clavier was one of the earliest "super angels," personally investing in startups before building out an institutional fund.

Through Uncork Capital, Clavier and his team have backed more than 280 companies since 2004, including early investments in Fitbit, Eventbrite, and Postmates. The firm typically writes seed-stage checks and focuses on mobile and cloud SaaS, consumer services, connected devices, marketplaces, and frontier tech such as AI and space tech.

Dave Morin

Dave Morin is another well-known angel investor. He co-founded the social app Path, which was acquired in 2015 and later shut down. Today, Morin is the founder of Slow Ventures, whose portfolio has included Slack, Pinterest, Evernote, and Postmates, and he also runs Offline Ventures.

As an individual angel investor, Morin's notable personal investments include Robinhood and Amplitude, spanning consumer and enterprise sectors.

Keith Rabois

Keith Rabois is one of the most prominent investors in Silicon Valley, known for backing companies early and staying closely involved as an operator-investor.

Rabois is currently a Managing Director at Khosla Ventures, where he has led investments in companies including DoorDash, Affirm, and Stripe. Earlier in his career he held executive roles at PayPal and LinkedIn before moving into investing full time.

Ron Conway

Ron Conway is one of the best-known angel investors in Silicon Valley and has a long track record of backing standout companies early. He was an early investor in Google, and has also backed companies including Facebook, Twitter, Airbnb, and Pinterest.

Conway founded SV Angel, the seed-stage investment firm he built with David Lee. SV Angel is now run day to day by Conway's son, Topher Conway, who serves as co-managing partner alongside Ron. Conway remains both an active angel investor and a venture capitalist through the firm.

David Lee

David Lee co-founded SV Angel with Ron Conway and served as its managing partner for several years, backing early investments in companies like Airbnb and Pinterest. He left SV Angel in 2015 and later co-founded the venture firm Refactor Capital.

Lee's investment focus has spanned technology, e-commerce, consumer internet, and data-driven startups across early and later funding rounds, across his time at both SV Angel and Refactor Capital.

How Do You Connect with Angel Investors?

Connecting with investors is challenging, especially angel investors. The good news is that online angel networks make the process easier. Networks like AngelMatch compile data on thousands of active angel investors, so you don't need a personal network or a lot of capital to get started. AngelMatch's investor directory can help point you toward investors who fit your startup's stage and industry.

The other ways to connect with angel investors include networking through social media, going to in-person events, and sending proposals to companies directly.

Angel Investor FAQs

What is the main difference between an angel investor and a venture capitalist?

An angel investor invests their own personal money and isn't affiliated with an investment firm, while a venture capitalist invests pooled money on behalf of a larger firm. That difference means less paperwork and a faster process when raising from angels.

How much do angel investors typically invest in a startup?

Individual angel checks typically fall between $50,000 and $250,000, most often during the seed or pre-seed round. The exact amount depends on the company, the round, and how much capital that investor has available.

What do angel investors get in return for investing?

Most angel investors take equity in exchange for their capital. As the startup grows in value, the investor can hold that equity for a future payout or, in some structures, convert and exit earlier.

Do angel investors only invest in the seed round?

Most angel investment happens at the seed round, since that is when startups are raising money to build a working business plan and launch a product. Some angels invest even earlier, at pre-seed, though that is less common.

How can I find angel investors for my startup?

You can network through social media, attend in-person fundraising events, or reach out to investors directly. Platforms like AngelMatch also let you search and filter active angel investors by industry, stage, and location.

Connect with Angel Investors Today

Angel investors are a startup company's best friend. An angel investor often invests before venture capitalists, and you'll raise more money with angel investors when compared to crowdfunding or bootstrapping.

Unfortunately, it's not always as simple as reaching out to an investor and securing funding. The good news is that connecting with angel investors is easier with platforms like AngelMatch which gives you access to 125,000+ investor profiles, including relevant and up-to-date information on some of the most active angel investors and firms.