Angel Investors are Overrated
October 13, 2008
Angel investors get a lot of publicity as the key to the growth of high-impact start-ups. A recent study by Scott Shane and the US SBA office of advocacy has statistics that show this impact is overrated.The key passage“…It finds that the angel capital market is smaller than previously estimated, and that most angel-backed firms are not potential high-growth start-ups” This was first highlighted here. In addition, a previous post here highlighted the different types of angels and Venture Hacks gives a good look at the value different investors here. Key takeaway:
“ Smart money is money plus the promise of help that’s worth paying for, dumb money is money plus hidden harm, and mostly money is mostly money. Weed out the dumb money with diligence. Evaluate supposedly smart money with the smart money test. Finally, assume your investors are mostly money: unbundle money and value-add to get money on the best terms possible and value-add on the best terms possible.”
