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How to Pick High-Quality Angel Investors: 5 Things to Look For

Angel investment can be a useful and indispensable financing option during the very early stages of starting up your company. But be aware: not all angel investors are the same. The range of quality among angel investors is massive—and can massively impact your company. Lighter Capital is often the first source of institutional financing after angel investments and boot-strapping and we have worked with many entrepreneurs who didn’t always get what they bargained for from their angel investors.

Sometimes amassing capital from any source can be tempting. But it pays to do your research and know the kind of investment partner you want to take on for the long haul.

Here are 5 top attributes of quality angel investors.

Strong experience

Your angel investors should have a proven record of investing in successful start-ups. This shows that they have the necessary experience to guide your company through the rocky start-up phase. Ideally, your angel investors should also have deep knowledge of your industry. Angels whose success (in business and/or in investing) comes solely from other industries may have strong opinions on how to grow your company that aren’t applicable in your field.


Angel investors are risk takers. Otherwise, they wouldn’t be willing to invest in your fledgling company. But taking risks needn’t be akin to taking a gamble. Look for investors that base their calculated risks on rational criteria rather on emotional considerations. Investors that are overconfident, follow the crowd, or are unwilling to learn from mistakes can steer your company in the wrong direction.

Can afford to lose the money

Seasoned angel investors realize that many of the companies they invest in are going to fail. If these were low-risk investments, they wouldn’t pay such high returns when they succeed. However, sometimes angels feel they can’t afford to lose the money they put into your company. Angels that are nervous about their investments may press you to make business decisions that result in a quick return on investment for the investor, but hamper the long-term growth of your company.

You want an angel who accepts the risks—and benefits—of investing in an unproven start-up, and who is willing to stay invested for the long-term. Such angel investors are the most likely to support you in growing your company.

Deep enough pockets

Being comfortable with the risks of investing in your company is necessary, but it’s not enough. The best angels also have enough money to invest along with a few other angel investors they can carry your company’s capital needs, and ideally the next round of financing.

While many small investors can add up to a substantial infusion of capital, having too many investors can be distracting and can make further rounds of financing more complicated. A small number of high-quality angel investors, all with strong experience and mutual trust is ideal. These groups intelligently work together and any one of them can “run point” on a deal.

Realistic expectations

Before you sign on the dotted line with a potential angel investor, be sure that they have realistic expectations about a timeline for growing your company and reaching your stated goals. Although accredited investors need to have at least $1 million in investable assets (or be very high wage-earners), not all of them want—or can afford—to have their money tied up for many years in a start-up. But that’s just what you may need to take your company to the desired heights.

Make sure they have realistic expectations about just how profitable your company will be. While many successful startups make handsome profits for angel investors, overinflated expectations can put pressure on you to take risks or short term decisions that get you off track and further away from building the long-term value in your company.

Finally, make sure you get recommendations for an angel’s current or previous portfolio companies as well as others in your local start-up community. Whatever you can discover about the way they build and manage relationships with entrepreneurs will help you decide whether they are a good fit for your company. Angel investors can be truly fantastic partners and mentors for young companies – just make sure the one you pick is right for you.

Further Reading:

  1. What is Seed Money and How to Find Angel Investors

  2. How to Pitch to Investors and Raise Angel Money

  3. 5 Steps to Raise Capital from Angel Investors