CEF is a charitable organization that focuses on education and research in the field of angel investing. It does not provide financing or investment to any entity.

ACEF does not review business plans or provide financing to companies and cannot introduce you or your business to an angel group or other investor. However, we do have a listing of angel groups in the US and Canada, with links to each group’s Web site. Entrepreneurs are welcome to review the directory to learn about the investment interests and processes of these organizations.

Click here for the angel group listing.

In addition to the directory, this page for entrepreneurs provides information on the following questions:

• What is an angel investor?
• What are angel groups?
• How do I find an angel group?
• What is the difference between angels and Venture Capitalists?
• How do I know my business is right for an angel group investment?
• When should I approach an angel group?
• What criteria do angel groups use to select entrepreneurs?
• What process can I expect if I apply to an angel group for funding?
• Will angel groups sign non-disclosure agreements? If they don’t, how do entrepreneurs protect confidentiality?
• Should I expect to pay fees to participate in the screening process or to present to an Angel Group?
• Are there other information resources?

An angel is a high net-worth individual who invests his or her own money in start-up companies in exchange for an equity share of the businesses. ACEF and the Kauffman Foundation recommend that entrepreneurs work with investors who are “accredited” investors (who meet requirements of the Securities and Exchange Commission) and who can add value to the company via high quality mentoring and advice. Other important things to know about angels include:

• Many angels are former entrepreneurs themselves
• They make investments in order to gain a return on their money, to participate in the entrepreneurial process, and often to “give back” to their communities by catalyzing economic growth.
• Angels make a return on their investment when the entrepreneur successfully grows the business and exits it, generally through a sale or merger
• It is estimated that angels invested $24 billion in 55,000 start-up businesses in 2004 (Source: Center for Venture Research)
• Angels tend to invest in companies that are located near them regionally

In an angel group, individual angels join with other angels to invest collectively in entrepreneurial firms. Angel organizations come in many forms, but all have certain characteristics:

• They meet regularly to review business proposals
• Selected entrepreneurs make presentations to the membership of the group
• Member angels decide whether to invest in the presenting business
• Angels work together to conduct “due diligence” to validate the plans, statements and history of the entrepreneurial team

Other points of interest about angel groups are:

• The size of angel group investments in entrepreneurial firms varies widely. A survey of member organizations of our companion organization, the Angel Capital Association, found that the median investment per round in 2003 was about $375,000.
• Groups invest in innovative firms in a range of industries. The most common areas are software, medical devices, telecommunications, and manufacturing.
• While some groups focus on a specific industry area, the majority are open to a variety of areas and select those markets with which some of their members have expertise

• Review the Listing of Angel Groups to find an angel group in your region. Click through to individual angel group websites to learn about their investment interests and processes
• Because some angels and angel groups are more likely to invest in firms that are recommended by people they know and trust, it is important to network in your community to gain a referral. Examples of people to contact include: entrepreneurs who are backed by angels or venture capitalists, attorneys who specialize in equity investment bankers, accountants and business counselors

While both invest in entrepreneurial firms and take equity (ownership) in those businesses, there are some important differences:

• Funding source – Angels invest their own funds directly in a business, while venture capitalists invest funds from other sources (e.g. pension funds, insurance companies, foundations)
• Stage of entrepreneur – In general, angels invest in seed, start-up and early-stage businesses, while venture capitalists invest in later-stage businesses (although there are exceptions)
• Size of investment – Venture capitalists generally invest $2 million and up in a financing round, while individual angels make much smaller investments ($5,000 to $100,000). Angel groups can make investments in the mid-range, between most individual angels and VCs.

Angel investment is the “right” source of funding for only a small proportion of entrepreneurial businesses. When considering yourself for investment by an individual angel or angel group, ask yourself these key questions:

• Am I willing to give up some amount of ownership and control of my company?
• Can I demonstrate that my company is likely to realize significant revenues and earnings in the next 3-7 years?
• Can I demonstrate that my company will produce a significant return for investors?
• Am I willing take the advice from investors and accept board of director decisions I may not always agree with?
• Do I have an exit plan for the company that may mean I’m not involved in 3 – 7 years?

In general, the best time to seek angel funding is when:

• Your product is developed or near completion
• You have existing customers or potential customers who will confirm they will buy from you
• You’ve invested your own dollars and exhausted other alternatives, including friends and family
• You can demonstrate that the business is likely to grow rapidly and reach at least $15-30 million in revenues in the next 3-7 years.
• Your business plan is in top shape.

No two groups are exactly alike, but generally groups expect to at least see the following:

• A strong management team with experience and proven skills.
• Unique product or service distinguished by an identified competitive advantage and large market
• Your personal financial investment in the company and investments from your friends and/or family.
• A clear picture of the market for your product or service and realistic plan for market penetration.
• An exit strategy for the investor that is reachable within 5 to 7 years.
• The potential for a strong return on investment

Angel groups follow several stages of review in order to make funding decisions. Below is a listing of these steps. It is important to recognize that groups may conduct these steps in a different order than is presented here.

• Application – Check with the angel group’s Web site to determine what documents are required initially. Many groups want the executive summary of your business plan, while others have an application form.

• Pre-Screening – When the angel group receives a completed application, staff or a committee of members reviews it quickly to determine if it meets the group’s general requirements. The pre-screening will eliminate applications that are incomplete, don't meet the organization's minimum requirements, or does not comply with the investing preferences of the organization. Expect one or two weeks for the pre-screening process.
• Screening – Once an application has been accepted for review, a group of staff and angels review and further define the opportunity. If the entrepreneur passes muster at this stage, the organization may select a "champion" for the opportunity and create a due diligence committee. The angel group may ask for your full business plan in this stage and some groups hold meetings with the entrepreneur during this stage. In general, about 10 to 25 percent of all entrepreneurs who apply reach this stage. Screening is usually completed within another one to three weeks.
• Investment Meeting – The entrepreneur is invited to make his or her pitch at a meeting of all members of the angel organization. A question-and-answer session follows the founder's presentation. Members discuss key issues about the company and determine initial interest in making individual or group investments after the entrepreneur leaves the meeting. Such investment meetings are usually held every month or two.
• Due Diligence – A team of members interested in investing and specialists with knowledge of the industry under consideration conduct a thorough check on you and your business. The objective is to validate the business plan, including the management team, market opportunity and amount of funding required, and to negotiate a term sheet, thus placing a value on the investment. A further cut is made: 25 to 50 percent of the companies that reach this stage are actually funded, and the process can continue for two weeks to several months.
• Term Sheet – If the group chooses to invest in your company, they will negotiate with you a term sheet, a document that guides lawyers in preparing investment agreements and which determines the relationship between the company and investors. Sometimes angel groups will begin term sheet negotiation during Due Diligence. For more information on standard term sheets, other investment documents, and issues to consider, click here or visit the Books page on this website.

During the initial portions of the evaluation process, the vast majority of angel organizations will not sign non-disclosure agreements. Angel groups just see too many deals, often in a similar space. When submitting executive summaries and even business plans, the entrepreneur needs to explain the business so that the potential investors can understand the company’s opportunity for success, but don’t learn about any confidential issues. If you have intellectual property that has not been patented, it is best not to disclose it to the angel group when you are first submitting your company for investment. Remember that angel groups are most interested in the business behind the technology or idea – they don’t invest in the inventions but in the business models and management teams that will grow the companies. If your company makes it through to final due diligence, the angel group may need to research intellectual property issues and then would sign non-disclosure agreements at that time.

In 2008, ACA recommends that angel groups charge entrepreneurs no more than nominal fees for applying for and/or making presentations for angel capital and that all fees are fully disclosed, ideally appearing on the group's Web site. The fees should be no more than a few hundred dollars for applications and no more than $500 for presentations. Transparency to entrepreneurs is of utmost importance, so full information about fee amounts and what the fees are for should be included on the group’s home page and/or other prominent portions of the site and other important promotional materials. Angel groups should also provide a consistent program of high quality coaching, preparation and feedback to entrepreneurs participating in screening and presentation activities. These guidelines match the practices of the great majority of ACA member groups, based on a 2008 survey. About than two-thirds of responding members charge no application or presentation fees, and the other third mostly charged nominal fees. The survey results are listed below. ACA will also pursue developing a database on member group investment practices, including fees, on our Web site to search and review by entrepreneurial ventures. ACA is an inclusive association that welcomes membership from any angel organization meeting the application criteria, but it does not endorse the practices of any group that levies large fees and/or does not forthrightly explain its potential fees to the entrepreneurial community.

Summary of Survey Responses on Charging Fees to Entrepreneurs
February 22, 2008:

Total survey responses - 82

Do you charge any fees?

• Yes – 31 (37.8%)
• No – 51 (62.2%)

If you charge, at what stage and how much?

• Application Fee
  - 18 groups charge
  - range of fees is $55 - $250
  - average = $151
  - median = $125
• Presentation Fee
  - 17 groups charge
  - range of fees is $175 - $750, with two “outliers” at $1,500 and $3,000
  - average = $580
  - average without outliers = $338
  - median = $400

Books :

• Angel Financing for Entrepreneurs: Early-Stage Funding for Long-Term Success, by Susan L. Preston. Published in 2007 by Jossey-Bass. ISBN number: 978-0-7879-8750-3
• Angel Investing: Matching Start-up Funds with Start-up Companies (Guide for Entrepreneurs, Individual Investors and Venture Capitalists), by Mark Van Osnabrugge and Robert Robinson. Published in 2000 by Josey-Bass. ISBN number: 0-7879-5202-8
• The Definitive Guide to Raising Money from Angels, by William H. Payne. Published in 2007 by Bill Payne and Associates. Available via www.billpayne.com
• Every Business Needs and Angel: Getting the Money You Need to Make Your Business Grow , by John May and Cal Simmons . Published in 2001 by Crown Publishing Group. ISBN number: 0-609-60778-2
• Finding an Angel Investor in a Day, by The Planning Shop and Joseph R. Bell. Published in 2007 by The Planning Shop. ISBN number 0-9740801-8-7

Additional book recommendations may be found under the Resources/Books section of our Web site.

Web Sites & Other Sources:

• Kauffman Foundation eVenturing - This site includes valuable information for entrepreneurs interested in growth, including a collection of articles, tools, and templates on “pitching angels.” The site includes a special section on valuation of pre-revenue companies.
• Angel Investor News - This site includes background on angel investing and has an entire section on preparing business plans and presentations.
• Inc Magazine - Contains articles and practical advice for entrepreneurs interested in obtaining angel funding.
• National Association of Investment Companies - This association of venture capital firms that invest in minority owned firms offers special insights.
• Small Business Administration - A good introduction to starting a business and writing your business plan.
• The Business Mentor - The entrepreneur’s business planning advisor on CD-ROM.