Can Angel Investors Earn Heavenly Returns?

Posted on 20 de setembro de 2010 por


This may be the best time in years for an investor to become an angel. But that doesn’t mean you should rush out to get yourself fitted for wings and a halo.

An angel investor is anyone who privately provides capital to a promising business, often a start-up, that isn’t run by a friend or family member. Scott Shane, an economist at Case Western Reserve University in Cleveland, estimates that the U.S. has at least 140,000 active angels who collectively invest some $20 billion a year in new businesses.

Right now, the rationale for becoming an angel sounds almost heavenly. Commercial and industrial lending by banks, the lifeblood of small and medium-size businesses, has dried up, falling 13% over the past 12 months. And the money raised by venture-capital funds, another leading source of financing for start-ups, is down 67% from last year. That has presented unusually attractive opportunities for outsiders who can provide financing.

Catherine Mott, president of BlueTree Allied Angels, a group of 43 wealthy angel investors in Pittsburgh, said one local high-tech start-up has orders for several million dollars’ of goods from national distributors, but banks won’t lend it the working capital to make its products. So the start-up is willing to give local angels an equity stake in exchange for cash to manufacture goods that are all but certain to sell, a situation that Ms. Mott, a former commercial banker, called “amazing.”

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