The Kingmaking Power of Angel Investors


The Kingmaking Power of Angel Investors

In recent weeks, I’ve spent more time formalizing the fundraising approach I’ve called the “Angel Army” strategy. I’ve written essays about it, I’ve talked about it in podcasts, and I’ve taught it in webinars.

As more people begin implementing the strategy, I’ve received helpful feedback that has helped me realize that I’ve skipped a step in promoting the strategy (side note: I love feedback. Share share share!).

In many cases, people who generally understand how to implement the Angel Army strategy pass on actually using it because they don’t grasp the magnitude of the value of angels. If I can’t get that point across, I’ve failed at delivering an important tool to founders. The impact angels can have on an early- stage company via fundraising and beyond is massive and thus deserves its own essay.

First, the history of angels

The term “Angel” actually isn’t a technology or company investing term. It comes from Broadway. Angels were the wealthy people who funded theatrical productions that were otherwise insolvent, non-money making ventures. These were things that could only be supported by someone who came from heaven to help like an angel. This term has been extended to apply to individuals who will put their own capital at risk to invest in and support businesses, usually at the earliest stages.

When it comes to the business investing version outside of the performing arts, angel investors in the past carried a much more negative connotation. They were capital that you went after because you couldn’t find capital elsewhere. A lot of times they were wealthy individuals and older executives. A common negative stereotype painted the picture of a dentist with money to spare who invested in businesses they didn’t understand. As such, the horror stories of small angel checks requiring fielding regular calls, creating extra reporting, and listening to personal complaints created a fairly negative picture of angel investors. This is represented in the common advice that experts used to give around not having too many people on your cap table. In my opinion, this advice was also needed in the era of old investing structures that would extend larger rights to angels than is common today.

Angel Investing today

Angel Investing has evolved significantly over the last ten years and insanely over the last two.

There are a variety of reasons that angel investing has evolved. One main trigger has been an accelerating transfer of wealth to younger tech- savvy individuals. This trend started with exits 10+ years ago like Google, YouTube, Facebook, Instagram, and Twitter, continuing with more recent tech darlings like Airbnb, Uber, and Snap. More significantly and in just the last few years, the explosion of crypto wealth has been one of the most significant transfers of wealth that the world has ever seen.

Alongside the minting of technocrat millionaires, highly visible wins have been a siren’s song for angel investing. Everything from Jason Calacanis turning a $25k Uber investment into >$100MM to loads of individuals turning even smaller investments into crypto ICOs into many millions of dollars has normalized the practice of investing money into tech startups.

With this new generation of angels, many of the old negatives have dissolved. Angel investors are now native to the world of technology startups who understand both the risk of a $0 outcome as well as the work that these technology companies engage in. This new generation has helped eliminate the thorn in your side angel investor stereotype.

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-Jason Yeh, Founder of Adamant Ventures