Talk:Angel investor

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Contents 1 Notes on Editing This Entry 2 Angel Motivation 3 Equity v. Ownership Equity 4 Creating a category for angel investors and business angels? 5 What to do about new edits? 6 Reference for statistics? / The Angelsoft question 7 Proposed merge

[edit] Notes on Editing This Entry

Before you edit this entry, please read the following notes, which discuss a number of points that mistakenly get 'corrected' and have to be reverted because they were rightin the first place. Also, when adding a comment to this page, PLEASE the comment with your username by using the four tilde signature macro. That way everyone can keep the discussion threads clear.

♦ Links: The only links that are appropriate for this article are those to objective, not-for-profit organizations dealing with angel investing. Any commercial links to matching networks, angel groups, business brokers, for-profit web sites, or any similar sites will be removed.

Kaufman has no business being listed here either. It is not truly objective, competes with for-profit seminars and companies, and is usually about 10 years too late to make any real difference. Wikidemo 15:28, 15 August 2007 (UTC)

The previous comment is incorrect. The Ewing Marion Kauffman Foundation (note the correct spelling) is indeed both objective and independent, does not compete with for-profit seminars and companies, and, at least in the case of angel investing, is without question both ahead of the curve and of major influence in this space. Anyone with feelings to the contrary should provide references on this discussion page, with explicit relevance to Kauffman's role in the field of angel investing, before editing the article. Yorker 03:08, 16 September 2007 (UTC)

Agreed on the "links." However, even non-profits can be spam links or simply not reliable sources. Some for-profit sources like major books, newspapers, etc., could be appropriate, but not newsletters or popular nonfiction (how-to books). Finally, academic papers are often too narrow or technical to be relevant or of general interest, but can be used to back up a statement made in the article. Just my opinion, not trying to make up policy. Wikidemo 15:28, 15 August 2007 (UTC)

♦ TARGET Return on Investment: The absolute, accurate fact is that "best practices" in angel investing, as explicitly taught in the courses officially sanctioned by both the Angel Capital Association and the National Association of Seed and Venture Funds, is that any given angel investment should, in theory, be capable of returning at LEAST 10x (the ACA course, as taught by Bill Payne, Entrepreneur in Residence at the Kauffman Foundation, actually suggests 30x.) The reason for this is simple if you do the math: for serious angel investors, out of ten investments it is quite typical for at least five to evaporate completely, and two or three struggle to return the original investment. That leaves two or three to 'make' the portfolio, which usually means (if the investor is lucky) two will bring in 2x-4x, and one (if you're really, really lucky), will do 10x or more. Consider that this happens over a typical holding period of 5-7 years (longer, by necessity, than the usual VC 5 year hold), and a little back-of-the envelope calculating of IRRs will show you why the target return needs to be so high.

♦ ACTUAL Return on investment: Even with a target of 20x-30x, and even in the hands of professional, the typical 'good' angel portfolio return ends up being about 20-30 percent, not 20-30 times. Understand that this is what happens in practice, and is the end result of targeting a 20x-30x return. That is, one has to aim for the moon, in order to achieve a modestly decent return.

♦ Business Angel: This term is not simply British. It is used throughout Europe, as witnessed by the Europen Business Angel Network (EBAN) which was established by the EU in 1999.

The term was originally English and it should be so noted. To suggest that an English word comes from Europe is inaccurate, although it is true that "business angel" is now commonly used there. Wikidemo 15:28, 15 August 2007 (UTC)

The introductory paragraph now simply refers to the fact that the term "business angel" is used in Europe (which includes the UK). The origin of the term 'angel' as applied to investing has been expanded further down in the article.Yorker 03:08, 16 September 2007 (UTC)

♦ Angel Groups: While angel groups or networks still account for a small minority of angel investors (substantially fewer than 10%), they are growing rapidly in numbers, size and investment capital. Angelsoft, the commercial company that provides the back-end infrastructure for most of the world's angel groups, has identified over 500 groups on six continents. For size reference, groups like Tech Coast Angels in California have over 250 members, and the more active groups, such as New York Angels in New York, regularly invest close to $10 million annually in seed stage deals, substantially more than virtually any VC firm.

All this information about angel groups should go under a different heading such as "angel groups". The vast majority of angel investors do not particpate in such groups and the current article exaggerates their importance. Wikidemo 15:28, 15 August 2007 (UTC)

Since angel groups are aggregates of angel investors this article is the appropriate place for them. The article has been edited to accurately reflect their size and relative importance. Yorker 03:08, 16 September 2007 (UTC)

[edit] Angel Motivation

Regarding the motivations of angel investors: Randall Collins' Interaction Ritual Chains has a good chapter on the emotional energy boost people in finance experience from being close to the "action".

[edit] Equity v. Ownership Equity

Could someone please disambiguate the use of the term "equity" in the opening paragraph? Thanks --68.105.218.72 08:46, 15 November 2005 (UTC)

Consider it disambiguated.

[edit] Creating a category for angel investors and business angels?

Why not create 'Category:Angel investors and business angels'

Umm...why? (That's actually a serious question. What would be the point? How many other articles would fit into the category?)Yorker 03:08, 16 September 2007 (UTC)

Many many pages

Don't we already have categories for start-up companies, venture finance, etc? The institution of angel investing is part of that business sector, not really a separate thing in itself. If there were to be a category it should reference the phenomenon, not the people, i.e. "angel investing" and not "angel investors". Also, a.i. & b.i. is an awkward double-definition. Wikidemo 19:04, 16 September 2007 (UTC)

As the article clearly states Venture capitalists are NOT the same as angel investors or business angels. and a.i. & b.a. is NOT awkward, the definition clearly explains that they are the same thing!

If AI and BA are the same thing, we have to choose one for the title and not duplicate it. We don't have a category for "airplanes and aeroplanes" or for "people and humans" or for "dogs and canines", etc. We should say it once. Also, I know that angel investors are not venture capitalists. Is the proposal truly to have a category where we list only people who are angel investors? If so the category is appropriate but seems so narrow that it's kind of unimportant. If the category goes beyond the people and addresses the issues surrounding angel investors like investment funds, securities instruments, angel funding rounds, term sheets, etc., then it is really not a distinct category because angel investing is a part of the venture funding process, start-up companies, etc.Wikidemo 13:34, 17 September 2007 (UTC)

Wrong again! 'Category:Real estate and property developers' is one such example of where the variations of one meaning: 'Real estate developer' in the U.S. and 'Property developer' in the U.K., have been combined into one category! I do not see why there is objection to creating this category! Angel investor or business angel is an occupation like 'Category:Investment bankers' or even 'Category:Lexicographers'! so what is your objection? If you wer concerned that it would be an empty category, I can assure you it wouldn't! I would add pages to it if only I could create the category! To address your other concerns above: the category would be contained within 'Category:Private equity' and would have appropriate links!

Suit yourself. I'm not opposing anything and won't, just making suggestions. Wikidemo 18:57, 17 September 2007 (UTC)

Ahh! OK, now I see what you mean. You're suggesting that we create the category as a way to organize biographies of specific individual angel investors. Well, that makes more sense than the way I orginally read it (which was a category for the single article about angel investing.) Nevertheless, I think I have to agree with Wikidemo on this one, but perhaps for different reasons. The fact is that there are probably 250,000 individual angel investors in the US alone (figure from the University of New Hampshire Center for Venture Research), and just because someone is an angel investor doesn't necessarily make them notable enough for inclusion in Wikipedia. What criteria should be used to consider whether someone should be tagged that way? If they have ever done an angel investment? If they have done x number of investments? or y amount of investment? or made z dollars investing? I can think offhand of a number of angel investors who are important because of their impact on angel investing (investors who come to mind include Bill Payne, Luis Villalobos, David S. Rose, John Huston, the late Hans Severiens, all in the US; Anthony Clarke in the UK, Hans Bertram in Holland, Brigitte Bauman in Switzerland), but none of them currently has a Wikipedia bio. Based on the number of commercial additions this article routinely gets, I shudder to think of how many self-serving 'angel investor' articles the existence of that category would generate. All that said, I'm not vehemently opposed to the creation of the category...I just don't think it's [at least yet] a great idea.Yorker 02:33, 1 October 2007 (UTC)

Of course I'm not suggesting creating an entry for every angel investor or business angel in the world. However there are some that are notable for instance the "Dragons" on Dragons' Den is just one instance. I believe it is as worthy a category as 'Category:Venture capitalists'

Interesting. But again, just because someone appears as an "investor" on a high-profile television show doesn't necessarily make them a serious angel investor (I'm not, of course, maintaining the inverse, but I'd note that only a very few of the deals that 'win' Dragon's Den actually get funded.) I come back to my discomfort with setting up a category which would largely (and by necessity, given the private nature of the business) be self-nominated.Yorker 14:01, 6 October 2007 (UTC)

[edit] What to do about new edits?

Rather than reverting all of the changes, I am restoring the old article content to where it used to be, at "Angel investor" (which is a more common, central term than "Angel capital"). There is indeed a good argument for why one would have two articles anyway, because both the investment itself, and the people who do the investing, are notable subjects. But there's obviously a deeper problem.

The earlier incarnation of the article is incomplete, not fully sourced, US-centric, and has a number of other problems. However, it is basically a sound article in that it gives a lay reader unfamiliar with the subject a quick, fairly accurate understanding of what the subject is all about. I'm afraid the new version, though much more accurate, is roblematic as a Wikipedia article. Obviously it needs a thorough copy-edit for format, and also the internal wikilinks. But it's also got no inline citation links, so it's very hard to verify. It has academic-style references rather than in-line citations, which aren't the favored way and make it hard to do collaborative work. Plus, even though the fine level details seem to be in order I think it's fundamentally off in its depiction of what angel capital really is. The lead section simply doesn't say it. What distinguishes angel investments from others is not that it's equity versus debt, but that it's money put up by small arm's length investors as opposed to owner/managers or larger, more formal funds. In the start-up world, particularly in tech, angels occupy a very specific niche in their relationship with company founders and with venture capital funds. It also reads like an essay and makes lots of claims that are dubious, or at best are not global. It makes no sense to talk about, say, only 2-3 percent of small firms demonstrating potential for rapid growth. That kind of statement is inherently POV. It's a judgment, not an encyclopedic summary of the world. If one sources that statement to a business book one is merely repeating someone else's business judgment, not repeating an encyclopedic fact.

I doubt the article in this form is viable. It is so far from where it needs to be content-wise that it's probably a dead end. Rather than trying to fix it, it would probably be better if someone could patiently take it piece by piece, sentence by sentence, find what is encyclopedic, relevant, and sourceable, and add that to the main article. In the meanwhile, I don't think we should dump the old article in favor of this version - we should have an article that can tell readers quickly and accurately what an angel invstor is, which is why I restored that version. Wikidemo (talk) 17:54, 10 January 2008 (UTC)

I think Wikidemo is bang on target with the above comments. Peter Kemball clearly spent a lot of time on his work, and he clearly means well, but unfortunately, as Wikidemo notes, he just 'doesn't get it', [sigh]. For all the noted reasons, I agree that it's a bit of a lost cause to try to edit, so, unless one of the other regular editors of "Angel Investor" has a problem with it, I am going to go back to the original (thanks, Wikidemo) and slowly try to bring over the good bits from the new article, with appropriate citations, editing, etc. Doing it a little bit at a time will allow everyone to follow along with the changes, and jump in with suggested edits. Once that's all done, I'll post notes to both articles' discussion pages with a pre-warning, and then edit "Angel Capital" to point to the new and improved "Angel Investor". Fair enough? Yorker (talk) 21:56, 19 January 2008 (UTC)

Just as a followup note to those concerned about this page, I see that folks are beginning to get cute and edit in things like references to specific angel groups (such as the recent addition about Keirestsu Forum). Rather than constantly policing this page, I'm simply going to work on cleaning up the original article, as note above, and then we'll deprecate this one. Yorker (talk) 05:27, 2 February 2008 (UTC)

[edit] Reference for statistics? / The Angelsoft question

As those following this page probably know, there are really only three halfway decent sources for ANY statistics on angel investing. The 'best' is the Center for Venture Research at the University of New Hampshire, although the Angel Capital Association recently released a good study with some useful data. The third, however, is Angelsoft, the commercial company that provides the back-end software for most of the world's organized angel groups. In a recent presentation at an ACA summit, they provided their latest numbers, including the fact that there are over 300 groups currently on their platform. Since that is now the high-water mark number (and, in theory, completely legit instead of estimated, like the UNH numbers), I've updated the article. But the question is what to do about the reference. On the one hand, data should be sourced wherever possible, but on the other, we absolutely don't allow commercial links in this article. I've erred on the side of citing it, but if someone else feels that including the link is starting down a slippery slope, by all means feel free to edit it out (but do keep the updated stats.)Yorker (talk) 05:26, 25 February 2008 (UTC)

I'm not clear why you think "we don't allow commercial links on this article"? Where does that come from? Good sources have always been acceptable on Wikipedia whether they are commercial or not. Our science articles are littered with references to for profit journals that require subscriptions to view. While commercial services in the external links section are generally considered unacceptable, there's no preference in our guidelines for nonprofit over for-profit organizations (though when you're talking about associations, nonprofits tend to be more appropriate). In any case the external links guidelines don't apply to citations. When it comes to citations free to view citations are preferred all else being equal, but the primary concern is providing the best source(s) for the information. -- SiobhanHansa 06:19, 25 February 2008 (UTC)

That makes sense. I was just trying to err on the cautious side by checking it. The 'commercial' question is one that affects much of Wikipedia, but as we all know, this particular article is more susceptible than most to being spammed by the 'for profit' matching services, directories and websites that play in this space. Thanks for the clarification. Yorker (talk) 02:20, 17 March 2008 (UTC)

OK, as I feared, Wikidemo has taken issue with the reference to Angelsoft, and has removed it as spam. Since Wikidemo has been something of a legitimate contributor to this article in the past, and since I was the one who originally included the reference (to be fair, after first raising the question here) to support a legitimate statistic in the text, I'm going to leave it to SiobhanHansa, as the other long-established, serious editor of this article, to make the call on whether the reference should be reinstated. I would note, for whatever it's worth, that the vast majority of the commercial links that get put in and removed are there to entice entrepreneurs to visit the link for funding, whereas this is simply a legitimate reference link to what I believe is the only company in the world that has direct relationships with over e00 organized groups of angel investors...which is the vast majority of groups in existence. That said, Siobhan, it's up to you (for what it's worth, if you do decide to reinstate it, I'd suggest that you include a note in the edit history referring back to this discussion, thanks, so we don't cycle endlessly.) Yorker (talk) 04:07, 30 March 2008 (UTC)

I'm confused by this comment. I haven't edited the article since back in October, and that was to remove a spammy external link, not a reference used to source material in the article. Wikidemo (talk) 05:30, 30 March 2008 (UTC)

Uh oh. Is it possible that your password has been compromised? Take a look at the tag for the last edit to the article: "21:44, March 26, 2008 Wikidemo (Talk | contribs) m (6,522 bytes) (→Profile of investor community: rm spamlink disguised as source (that does not support claim)) Yorker (talk) 21:53, 6 April 2008 (UTC)

I see what happened. It is a byproduct of the ill-advised move (and complete but poor quality rewrite) of this article a while back. This is the talk page for "Angel capital", not Angel investor, the article about which you are speaking. Regarding that article, I don't believe the link supported the proposition for which it was a citation - it just looked thrown in there, the link to the home page of a software company. That's clearly not a valid external link under WP:EL. If the company released a statistic you need to link to that for verification, not to the company's home page. I don't agree that there are only three useful sources of information about angel investors, BTW. Angel investment is written about and studied extensively. Wikidemo (talk) 12:35, 7 April 2008 (UTC)

OK, fair enough comment about the Angelsoft link. I was simply trying to reference the source, but at that point I couldn't find a reference on the Angelsoft site for that particular statistic. I won't put it back in unless and until it points to a relevant reference. Yorker (talk) 03:20, 21 April 2008 (UTC)

As to the comment "Angel investment is written about and studied extensively", ummm...with all due respect, I'm very familiar with the literature and current statistics, and the unfortunate fact is that there has been very, very little written or studied about the angel investing phenomenon. Aside from some early work by Robbie Robinson when he was at Harvard (he's now at the University of Hawaii, and while he's running their angel group, he is no longer publishing academically on the subject), the ONLY current studies and/or statistics have been published by Jeffrey Sohl at the Center for Venture Research at the University of New Hampshire (who received the ACA's Hans Severiens Award last year), and Rob Wiltbank at Willamette University in Oregon (who was contracted by the ACA to do their recent survey of 600+ angels, from which they derived the data that was released in November.) Internationally, the situation is even worse. At the EBAN Congress in Arnhem last week there was a panel that discussed the only three international studies (one each from France, Holland and Italy), but all three were superficial, non-academic, and (in some cases) internally self-contradictory. If you know of any other sources of current statistics, by all means PLEASE note them here! You'll be doing a great favor to the ACA, EBAN, NAO and everyone else who is trying to figure out this market but doesn't have the hard data. Yorker (talk) 03:20, 21 April 2008 (UTC)

New information about statistics: at the 2008 Angel Capital Association Summit in San Diego, the ACA announced a deal with Dow Jones Venture One to create a new survey and annual data publication of activity in the angel space. It will rely on data self-submitted by organized angel groups (similar to PWC Moneytree for venture capital). They aren't going to publish anything for at least six months, however, and there was widespread skepticism that they'll be able to get any better data than the ACA itself has been able to gather in the past. But we can always hope...Yorker (talk) 04:37, 12 May 2008 (UTC)

Hmm. Someone added another Angelsoft reference, which I have just deleted (at least for now). Given the significant role that the company is playing in the angel industry, I think it is inevitable that it will eventually end up somehow in this article (at least as a reference source, if not as a substantive topic in its own right), but I don't think we're there yet. For those not following the industry, Angelsoft was founded about five years ago, and is the web platform used by just about all of the world's organized angel groups. It is the official software of the American, European, British and Canadian umbrella angel organizations, and is currently tying together (according to the data presented last week at the ACA Summit in San Diego) over 8,000 angel investors in 450 groups in 43 countries, and processing over 2,000 business plans each month. It is the primary way that all these groups are co-investing in deals, and because it is capturing granular data at the source, if they ever publish anything, it will clearly become the primary source for metrics on the subjec . But since the company hasn't YET published any data, and there isn't a whole lot on their website that can be directly referenced as objective facts, I've removed the link. But if the consensus is that it's time to include them, I'm OK with that as well (just trying to err on the side of caution here, given the previous discussion.)Yorker (talk) 04:37, 12 May 2008 (UTC)

[edit] Proposed merge

There is currently a proposal to merge this article into Angel Capital. That's problematic because Angel Capital is a poorly structured and entirely uncited article that is full of errors and so bulky that it is more-or-less impossible to fix. Some of the content from this article has already been added in, and it did not help the article. A better solution is to merge the small about of relevant, sourceable content from the other article into this one, then redirect it here (or vice-versa). That's going to be hard to do because this article is not well sourced or organized either. The real solution is a thorough reconstruction of a single article from the ground up. It's a very important subject so that's a worthwhile effort. 20:36, 8 May 2008 (UTC)

Yup. I think the person suggesting the merge hadn't actually read the discussion pages for either article, because we've discussed this pretty extensively. The consensus is that (absent someone doing a complete, ground-up re-write with which we can all get comfortable) we are going to try to bring over the little bit of good stuff from Angel Capital into this one, and then deprecate the other one. As such, I'm going to take the liberty of removing the Merge tag.Yorker (talk) 04:10, 12 May 2008 (UTC)

Note to anyone thinking about merging this article:

Please read all the Talk pages to understand what we're doing, and why. Thanks!