Angel investors are getting organized, and that is attracting some ultra-wealthy families eager for hands-on alternatives to traditional investments.
A type of private-equity investing, angel investing typically involves early stage support for small companies. Like venture capitalists, angels frequently provide continuing advice to the entrepreneur. But they differ from venture capitalists in that they usually use their own money, and sometimes focus more on the long-term success of a venture than on making a relatively short-term "killing."
Angel investors are also the friends-and-family networks that have been funding startups for ages.
James Geshwiler, managing director of CommonAngels, a Boston angel investing network, has seen noticeable growth in the number of such outfits in the 12 years he has been in the business. And since the downturn of 2008, Geshwiler is seeing more wealthy families looking to get in on angel investments.
Already by 2008, families offices — private wealth management entities owned by ultra-high-net-worth families — were the fourth-biggest angel co-investors around, according to a study by the Angel Capital Association, a Washington industry group.
But before the advent of angel groups, angel opportunities were tough to get wind of and hard to assess. "Most angels don't do this full time," Geshwiler said. "We do, and we bring several dozen opportunities a month to the attention of our members."
In addition to "lots of information" on early stage ventures, Geshwiler said CommonAngels identifies members with skills and interests that might help a startup.
Members invest at least $500,000 in a CommonAngels fund, and they are free to make additional direct investments in CommonAngels-identified businesses.
"For the families, it's really about getting more exposure and more diversification," Geshwiler said.
To be sure, because they are few in number and reluctant to talk, it is hard to speak of genuine trends among the ultrarich. But it seems to Joseph Reilly, the president of the Family Office Association in Greenwich, Conn., that people with hundreds of millions of dollars have taken more interest in angel investing.
These superrich may have access to more products than retail investors, but they cannot get in on deals the way big pensions and endowments can. And when they do, they are liable to pay more for the privilege, said Reilly, whose group provides networking opportunities to ultra-wealthy families.
Angel investing gives them an early and low-cost entree to startups. And it can give them a real say in the way the business is run.
