Myths of Angel Investing

It’s tempting to believe there are many wealthy ex-entrepreneurs out there eager to invest tens of thousands of dollars in your start-up — even though you’ve never met.

Scott Shane, a Case Western Reserve University entrepreneurship professor, argues that such “angel” investors are far rarer than most entrepreneurs imagine. He has laid out some of the myths about angel investors.

Among them: Angel investors are like venture capitalists, they just invest less; most angel investing is done by organized groups; angels frequently invest $50,000 or $100,000 in businesses.

Here’s what readers said:

“Many angels maintain a low profile. If you don’t, then you subject yourself to all kind of people with crazy ideas. A good place for investing leads is from your local community bank. Establish a relationship with them so that you can mull over their loan rejects.”

“Yes, we looked at angel investments for our company and have decided against it. The issues were:

1. Organized angel groups DID act like [venture capitalists] too much — they were chasing unrealistic return expectations, looking for a 30% return on every investment within a couple years. Yes, that’s a great model, but [it's] not going to happen most of the time.

2. They want something unique, patentable, leverageable, and with skyrocketing revenue.”

Technorati Tags: All Kind Of People, Angel Groups, Angel Investing, Angel Investments, Angel Investors, Angels, Case Western Reserve, Case Western Reserve University, Community Bank, Crazy Ideas, Local Community, Low Profile, Myths, Return Expectations, Scott Shane, Tens Of Thousands, Thousands Of Dollars, Time 2, Venture Capitalists, Western Reserve University