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To add to Luckiest answers, some states are now encouraging angel networks. Wisconsin has a great program set up to encourage investors. You may want to research government programs also.

I have a question myself...

Through private investing, is the process of actually receiving the funds faster than if I were to attempt to get VC funding from an institute?

1) Simply put, angel investors invest in the types of businesses that interest them. That can cover a wide range of business types and industries.

Typically though, "serial angels" (those sophisticated investors who routinely put capital into many businesses (though they tend to prefer those they have experience in) and do so over a period of time and are always looking for investments. They usually are looking for high growth businesses. "One shot" or main street type angels that limit their activities are often local business people or professionals that have some extra capital to put to work in businesses in their area and may not do things on the scale of a serial or professional angel investor. They may consider smaller opportunities or lower growth type businesses that are local to them, that show them the business is viable and has opportunities, where they have access and can observe how the business develops.

2) Usually an angel investor is a straight equity investor (or places the funds with you as convertible debt).

That means they buy part of your company (the stock) for part of the ownership. Depending on their own requirements that may be a minority position (less than 50%) or majority position (more than 51%). Rarely would you see a 50/50 split and frankly that is not a good position to be in since no one has clear control of the business direction if it came down to a ‘vote'. As a business owner unless you have some real compelling reason to do it ... never give up more than 49% of your business to investors. My opinion of course.

With more sophisticated angels, you sometimes will see them (and VC's) use a convertible note (sometimes called a debenture) to secure the capital they put into a company. That means they put the money in as debt (loan the money to the company) and in return get paid back with interest ... since their money is at significant risk (especially if you are new company or start-up) they want it structured as debt so they can recoup some of the money if the business fails. When a business fails creditors sometimes have a shot at getting some money back by seizing assets and selling them to re-pay the debt or going after any personal (non-business) collateral if tied to the debt. Equity investors do not have any recourse if the business fails. But if the business has real growth prospects, the note will probably have conversion rights so that if the business succeeds they can change their debt to equity (stock) in the company. That is the "sweetener" in the deal for the angel investor and often is referred to as an "equity kicker".

3) You can find them by searching online for "angel investors".

You will find a lot of web sites but will need to sift through them all to find the ones that are direct contacts (not intermediary or venue sites that sell you access to the investors) and to find the ones that are going to be interested in your type of business. You can find them on your own but it does take work on our part. You can also search this online community and find other info on angel investors that might be of interest or informative.

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I hope the above helps. If you get into your search and have other questions, post them here or on this site and you'll get feedback on them ... also feel free to contact me direct and I'll help you as best I can.

Dennis Lowery

Adducent, Inc.

Basket_Guy, I can't add anything better than the answers already posted regarding your questions.

Kontent_King, angels are generally making much smaller investments than venture capitalists. Most angel investors seem to have a specific type of investment they prefer, and the paperwork is usually fairly straightforward. In contrast, VCs often have very complex (and lengthy) term sheets -- you can spend a lot of time and money with attorneys just trying to understand the deal. So yes, private investors provide funding MUCH faster, but then that sort of figures since the amounts involved are generally much less.

Hope that helps.

Thank you Lighthouse

I've also filled my head with alot of knowledge from reading in this thread.

I'm here to stay for sure.