Take a Look at How Much Angel Investors Invest in Startups

Published on
January 24, 2023
Take a Look at How Much Angel Investors Invest in Startups
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Angel investors are an important part of the life of startups. They provide critical funding at seed stage or in times of growth. For startups, it's important to know how much angel investors invest typically, to serve as a guide.

In this article, we take a look at how much angel investors invest in startups, as well as factors that affect their investment terms.

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How Much Money Do Angel Investors Invest?

Angel investors are high net worth individuals who provide capital for startups in exchange for equity. They typically invest smaller sums of money than venture capitalists, and they often play an active role in the businesses they invest in.

Let's take a look at how much angel investors invest typically in startups.

The average angel investment is $52,000, according to the Angel Capital Association. But that figure can be misleading because the average is skewed by a handful of very large investments.

The median angel investment is actually $25,000. The average angel investor makes about 2.5 investments per year, according to the ACA.

So even if an angel only invests the median amount of $25,000 per deal, they're still putting $62,500 per year into startups. Of course, there are always outliers.

(Source)

Some angel investors invest much more than the average, and some invest much less. It all depends on the individual investor and the business they're investing in.

Additionally, many angels will also provide non-monetary benefits such as mentorship and introductions which can be just as valuable as the financial investment itself.

If you're looking to raise money from an angel investor, it's important to remember that they're investing their own money.

So while they may be more lenient than venture capitalists when it comes to things like equity and control, they still want to see a good return on their investment.

Angel investors are a crucial part of the startup ecosystem, and they can provide much-needed capital for early-stage businesses. If you're thinking of raising money from an angel, make sure you do your homework and know what they're looking for.

Key Takeaway: The average angel investor invests $52,000 per deal, but the median investment is actually $25,000.

What Is the Average Investment Size for an Angel Investor?

The average investment size for an angel investor falls into the range of $25,000 to $100,000. That is how much angel investors invest in startups typically.

Of course, the amount that an angel investor is willing to invest can vary depending on a number of factors, such as the stage of the company, the industry, the company's growth potential, and the investor's own personal preferences.

If you're looking to raise money from an angel investor, you should be prepared to give up a decent chunk of equity in your company. In exchange for their investment, angels typically want somewhere between a 10% and 20% ownership stake in the company.

So, if you're looking to raise $100,000 from an angel investor, you should expect to give up 10% to 20% of your company in return.

Of course, every deal is different, and there is no set formula for how much equity an angel investor will want in return for their investment.

But this should give you a general idea of what to expect. If you're looking to raise money from an angel investor, be prepared to give up a decent chunk of equity in your company.

Key Takeaway: An angel investor will typically want between 10-20% equity stake in a company in exchange for their investment.

How Many Investments Do Angel Investors Make Per Year?

According to the Angel Capital Association, the average angel investor makes between 6 and 13 investments per year. That's a lot of investment!

And it's not just a small number of wealthy individuals doing this. Angels come from all walks of life.

So, what does this mean for entrepreneurs who are seeking funding?

It means that there is a good chance that an angel investor will be interested in your business. But it also means that you need to be prepared to present your business in the best light possible.

Here are a few tips to help you get started:

1. Do Your Research

Make sure you know who you are pitching to and what their interests are. This will help you tailor your pitch and give you a better chance of getting funded.

2. Make a Great Impression

First impressions are everything, so make sure you dress the part and come across as confident and professional.

3. Have a Solid Business Plan

Angels want to see that you have a well-thought-out plan for your business. This includes knowing your target market, your competition, and how you plan to make money.

4. Be Prepared to Answer Tough Questions

Angels will want to know everything about your business, so be prepared to answer questions about your finances, your team, and your plans for the future.

5. Follow Up

After your meeting, make sure to send a thank-you note and keep the angel updated on your progress. This will show that you are serious about your business and appreciate their time and interest.

Key Takeaway: To attract angel investors, do your research, make a great impression, and have a solid business plan.

What Returns Do Angels Expect From Their Investments

When it comes to expected returns, angel investors are looking for a few things. Of course, they want to make money off of their investment, but they're also looking for a return that is commensurate with the level of risk they are taking.

For example, an angel investor who is investing in a startup that is in its early stages of development is going to expect a higher return than someone who is investing in a more established company.

There are a few factors that can affect an individual angel investor's expected return.

The amount of money that the investor has to put into the deal is one factor. The level of risk involved is another.

And, of course, the overall performance of the company that the investor is putting money into will also play a role. In general, angel investors are looking for a return of anywhere from 2x to 10x their initial investment.

This means that if they put $100,000 into a company, they would ideally like to see that company be sold for $200,000 to $1,000,000. Of course, this is not always possible, and there are always going to be some deals that don't work out.

Conclusion

Now that we've taken a look at how much angel investors invest in startups, you can use this as a guide to plan out your funding stages.

Remember: a robust startup with a great product and team is key to a successful pitch. 

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Jed Ng
Author:
Jed Ng

“Jed is the Founder of AngelSchool.vc - a program dedicated to helping emerging investor build and scale Angel syndicates.

He has a track record of exits and Unicorns, and is backed by 750+ LPs.

He previously built and ran the world's largest API Marketplace in partnership with a16z-backed, RapidAPI.com".

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