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Angel Investing: Matching Startup Funds with Startup Companies - A Guide for Entrepreneurs, Individual Investors, and Venture Capitalists (Paperback)
by Mark Van Osnabrugge , Robert J. Robinson
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Entrepreneurship, Start-up companies, Venture business |
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Author: Mark Van Osnabrugge , Robert J. Robinson
Publisher: Jossey-Bass; 1 edition
Pub. in: May, 2000
ISBN: 0787952028
Pages: 320
Measurements: 9 x 5.8 x 1.1 inches
Origin of product: USA
Order code: BA01183
Other information: ISBN-13: 978-0787952020
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- MSL Picks -
"Angel Investing" by Mark Van Osnabrugge and Robert J. Robinson gives useful information about angel investors and venture capitalists.
Van Osnabrugge and Robinson estimate that angel investors-wealthy individuals who invest their own money into start-up companies--invest three to five times more money than venture capitalists and back thirty to forty times more ventures, making angel investors the primary source of external capital for entrepreneurs.
But, how do you meet and present your business idea to an angel investor? What factors do angel investors give the most weight to when debating whether or not to fund a venture? How do angel investors differ from venture capitalists when valuing a start-up company?
"Angel Investing" answers these questions and many more. It is stuffed with studies, interviews, and solid advice. "Angel Investing" can be divided into three main categories:
- General background about angel investors and venture capitalists and their relationship and importance to business and the economy.
- Practical advice for entrepreneurs seeking start-up funds from angel investors or venture capitalists.
- Practical advice for individuals considering becoming angel investors and making investments in small companies.
Each topic in "Angel Investing" is well documented. It's a rather formal book, actually. Robinson is a professor at the Harvard Business School and Van Osnabrugge is a former fellow of the Harvard Business School.
I found the section about successful angel investment deals a bit too rich for my taste. For example, we learn that one angel investor who backed amazon.com got a 260 times return on his initial investment of $100,000 making him $26 million. Another angel who invested in the Body Shop received 10,500 times his initial investment. As a new angel investor, don't get overly excited about the prospects! Remember, many angel investments fail dismally. As the authors point out, you must only invest money you can afford to lose!
If you are already a financially successful entrepreneur who considers becoming an angel investor, you might want to read "Angel Investing" to help improve the chances of making successful angel investments. However, the book is not a complete analysis of the due diligence process.
And, of course, from an entrepreneur's standpoint, reading a book won't automatically put you in contact with serious angel investors, and much of the real work in financing a new venture involves finding personal contacts to introduce you to appropriate angel investors. Van Osnabrugge and Robinson note that most funded ventures involve personal introductions.
Maybe, if you're ready to invest $50,000 per company or more (and ready to lose $50,000 or more per investment!), you're tired of investing in public companies (with mystic accounting and lack of reportability to the investor), and you want to add value to your investment by contributing information and contacts to your investment, this might be a good book to help get you started. On the downside, you'll probably have no diversification and poor liquidity with angel investments.
The most important tip from "Angel Investing": Do adequate research before investing in a company. And, it's best if you know the industry and know business.
(From quoting Peter Hupalo, Author of "Thinking Like An Entrepreneur." )
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Mark Van Osnabrugge is a consultant at Marakon Associates, a top-tier international consulting firm based in Stamford, Connecticut. A former fellow of the Harvard Business School, he is also the widely published author of articles about entrepreneurial finance. He lives in Chicago, Illinois. ROBERT J. ROBINSON is associate professor of negotiations at the Harvard Business School and an angel investor with experience in a variety of startup companies. He lives in Boston, Massachusetts.
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From Publisher
They deliver more capital to entrepreneurs than any other source. And they often receive an incredible return on their investments. They're angel investors, some of the most important - and least understood--players in business today. The United States has close to three million angels, whose investments in startups exceed $60 billion per year. Some of our most successful companies were funded by angels - companies like Ford, AOL, and Amazon.com. But until now, little has been written about these angels, due in part to their preference for anonymity. Angel Investors provides an inside look at who these angels are and how they operate. It also shows would-be angels and entrepreneurs how best to find each other.
Authoritative look at this emerging form of financing, complete with stories of investors and companies that have led the way. Guide for entrepreneurs seeking capital and private investors looking for better returns on investments. Includes resource section with a list of services matching entrepreneurs with investors and more. DLC: New business enterprises - Finance.
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| View all 9 comments |
Amazon.com (MSL quote), USA
<2008-02-27 00:00>
According to Robert J. Robinson and Mark van Osnabrugge, so-called business angels-those generally unheralded private investors who usually specialize in high-growth fields and often involve themselves directly in the endeavors they fund-now provide 30 to 40 times more financing each year than their more famous counterparts, venture capitalists. In Angel Investing, Robinson and Van Osnabrugge use personal interviews, anecdotal evidence, and more than 300 research studies to show exactly who these financiers are, how they operate, and where they can be found. Robinson, an international management consultant, and Van Osnabrugge, an associate professor at Harvard Business School, also compare various financing options, explain precisely how angels and venture capitalists function differently, describe proven ways to attract them, and provide relevant resources. "The vast size and power of the business angel market in the United States is not well understood but is of incredible importance to our entrepreneurial sector and, indirectly, to maintaining our economic growth and standard of living," the authors write. They pack their book accordingly with valuable information for serious fund-seekers who have exhausted the traditional three F's (founder, family, and friends), as well as those who are considering entrepreneurial investments of their own. - Howard Rothman
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The Industry Standard (MSL quote), USA
<2008-02-27 00:00>
Quick, take a guess. Which source of funding has seeded more companies in the past 20 years: angel money or venture capital? If you chose the latter, you'd be wrong. "Venture capitalists get all the press today, but the majority of entrepreneurial firms are actually funded by business angels, especially those firms in their earliest stages," say Mark Van Osnabrugge and Robert J. Robinson in their ambitious new book, Angel Investing.
The authors argue, convincingly, that angels - private investors who take a long-term interest in early startups - fund 30 to 40 times as many companies as venture capitalists every year. The sum total of $50 billion in annual angel investment is three to five times that of total VC investment.
Both figures need a bit of footnoting. First, angel money naturally goes to a far greater number of companies than venture money. That's because angel investors put relatively small amounts into more companies at the early stages - long before VCs typically pledge their funds and expertise. And as for the size of the overall investments: Venture investments leaped to $17 billion last quarter, according to research firm Venture Economics. But don't let this blur the real story - the surge in VC investment has only reinforced the importance of angel investing. As the stakes of venture capitalists increase (the median stake doubled to $12 million last quarter), the importance of angels in nudging fledgling companies along (anything from healthy private companies to IPO candidates) is all the more critical.
But be warned: This book, which is packed with charts, tables and academic citations, probably won't keep you awake past eight at night. But then again, it doesn't claim to be a thriller. What it does do is deliver on its promise to tell you everything you need to know about one of the most overlooked and underanalyzed sources of investment capital in the economy.
The authors detail how the rise in angel activity is intrinsically linked to the surge in entrepreneurial activity over the past two decades. They compare the value of business angels to venture capitalists. And they provide more than 100 pages of information designed to help angels, with everything from a list of known networks to tips on writing a business plan.
The book's subtitle reveals one of its greatest strengths: It shows how to match a source of finance to your entrepreneurial venture. There is no single financing solution for every company, but this book does a thorough job of guiding entrepreneurs to the appropriate source. Van Osnabrugge and Robinson depict the startup process as a continuum, an entrepreneurial evolution comprised of distinct phases with specific funding and support needs, and they clearly show how to identify which phase a given company is in at a given time.
Angel Investing stands out from other financial books in its appeal both to those seeking angel funds and those who wish to become angels themselves. The authors also discuss the emergence of a new class of angel: entrepreneurs who have enjoyed huge success and wish to share their wealth and expertise. And they emphasize the added value that these patient, experienced angels often lend to a business.
Angel Investing will help guide business people on either side of the deal. And it should ultimately help those who plan to bridge both sides of this dynamic - those who can grow an angel stake into the sort of success that will enable them to someday become angels themselves.
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Robert E. Berney, chief economist, U.S. Small Business Administration , USA
<2008-02-27 00:00>
This is the best research on the angel capital market that I've seen. It should be read by every serious researcher in small business finance as well as students in classes in entrepreneurial finance, but it is also a must read for every entrepreneur who needs additional equity financing. |
Peter S. Cohan, author, Net Profit and The Technology Leaders , USA
<2008-02-27 00:00>
Angel Investing is the definitive resource on an emerging new source of capital and talent. Van Osnabrugge and Robinson have assembled valuable information for entrepreneurs seeking capital and angels seeking startups. |
View all 9 comments |
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