As an angel investor, you have two options. You either work alone or you become a part of an angel investor network/group that’s formed by peer investors. They do it because they can invest more money in a much more organized way than they could do on their own.
How Many Networks Are There?
In regards to the number of these networks, we see a common pattern both in the USA and Europe. There was a rapid growth until 2012-2013, but since then, angel network growth has slowed down and started to consolidate.
According to Angel Capital Association (ACA) between 1996 and 2013, in 17 years, the number of angel groups has grown more than 30 times, from 10 to 300. And according to European Business Angels Network (EBAN), currently, there are approximately 400 active networks in Europe.
These networks are usually organized by geographic region and have 100-200 members each. Although they generally focus on specific industries, some of them are more flexible.
According to ACA, in 2019, 79 different angel groups in the US & Canada, have invested over $300M, funding more than 850 early-stage startups. And in Europe, according to EBAN, the visible angel investment market has grown by 8% from €745M in 2018 to €804M in 2019.
When Do Startups Need Angel Networks?
Early-stage startups might work with different types of investors. It depends on two things: the stage of their business and the amount of investment they need.
Steve Barsh from Dreamit Ventures and Heini Zachariassen from Vivino say the same thing. At the idea stage, where there’s not much traction, startups need between $5-50K. And they usually refer to more unsophisticated investors like friends and family.
A bit later down the road, when the startup has built a POC or MVP, the founders may go to individual angel investors, who have some experience in the same industry, to ask for $10-250K.
Later on, if everything goes well, the startup releases the solution and starts to have some early traction. At that point, it usually requires $100K-$2M. And this is where angel investor networks come into the picture. Because this stage is too early (hence too risky) for VCs but the amount is too high for individual angels.
According to EBAN, in 2019, the average ticket size was approximately €25K. But, for the same period, the average deal size was €256K. As a startup, this means you either chase 10 individual angels separately, or instead, work with a single angel investor network.
Why Do Angel Investors Form Groups & Networks?
Now let’s flip the coin and look at the investor side of the game. It makes sense for the startups to work with networks but why do investors want to come together? There are a variety of reasons for angel investors to do so, including:
- Developing a healthy pipeline of quality deals
- Lowering the risk in investing
- Increasing investment diversification
- Ability to conduct better due diligence
- Ability to make more sizable and meaningful investments
- Having more control over the success of the startups
As I mentioned above, most early-stage startups seek more cash than any single angel investor is willing to invest. As an angel investor, by dividing that ownership stake among several investors, you may only need to kick in much smaller amounts on a single deal.
Every professional investment requires decent due diligence. And this takes a lot of time and money. When angel investors act as a group, they can split the cost.
But this collaboration is not only about cost-saving. They can also draw on each other’s experience and expertise. At the end of the day, every investor makes the final decision on their own. But members of the network get input from each other before they decide whether to invest or not.
By definition, angel investing is a high-risk high-return type of investment. And thus, to protect your capital, most experts suggest having a portfolio of at least 10 companies. So being a part of such a network helps you to have a steady flow of leads coming in, which is quite hard to achieve on your own. This is the biggest advantage of joining an angel group.
Disadvantages for Angels
As an angel investor, it might look like a no-brainer to join one of these networks. But there are things you have to consider.
First of all, you have to know that there’s a time commitment. You must both attend the screening meetings, and networking events the group organizes.
Moreover, every member of a network usually needs to invest a certain amount every year. For example, the New York Angels ask every member to invest at least $50,000 yearly.
And finally, most angel investor groups invest in high-risk high-reward deals. As an investor, if you want to stay on the safe side, these networks might not be the right address for you.
How To Meet Angel Investor Groups & Networks
Either you’re a startup or an individual angel investor, there are a variety of ways to meet these angel groups:
- Through networking
- Personal introductions
- Attending pitch night events
- Through local coworking spaces and accelerators
- Local events
- Angel investor associations
Top Angel Investor Networks
Below is a list of some of the top angel investor networks by geography. I picked the list based on the number of investments these groups have made, and the number of exits they have had so far.
- Tech Coast Angels (Southern California)
- Alliance of Angels (Seattle)
- Keiretsu Forum (Global)
- Sand Hill Angels (Silicon Valley)
- New York Angels (New York)
- Band of Angels (Silicon Valley)
- Techammer (New York)
- Zillionize Angel (Silicon Valley)
- Hyde Park Angels (Chicago)
- Houston Angel Network (Houston)
- Dingman Center Angels (Maryland)
- Hub Angels (Boston)
- ACF Investors (United Kingdom)
- 10X Group (Germany)
- Saarbruecker21 (Germany)
- Go Beyond (Switzerland)
- Cambridge Angels (United Kingdom)
- Archangels (United Kingdom)
- Italian Angels (Italy)
- SFC Capital (United Kingdom)
- Newable Private Investing (United Kingdom)
- Avonmore Developments (United Kingdom)
- Club Degli Investiori (Italy)
- BIC Angels (Turkey)