Individual angel investors are significantly more formidable in a group they are on their own. For this reason, angels are more frequently pooling their knowledge, resources, and skills than ever before. Some specific advantages of forming angel groups include:
- Improved Sourcing: Angel groups have access to significantly more deal flow than individuals. Members share their social networks, and the group’s size and presence at events attracts even more applications.
- Risk Dispersion: Through syndication, angels can reduce risk by investing less money in more ventures.
- Cost Dispersion: The costs of legal counsel, due diligence, accounting, and other miscellaneous costs are spread over the entire group, reducing individual cost burdens.
- Investment Scale: By pooling resources, groups can invest in larger, later-stage companies than they could otherwise.
- Knowledge Sharing: Angels can share their expertise in particular fields or stages of the investment process, improving the odds of success for the group.
- Standardized Documents: Standardized term sheets, final agreements, and other documents reduce the need for angels to draft their own before investing.
- Centralized Management: A central team that screens applications, coaches companies for presentations, manages events and finances, and organizes due diligence reduces work burden.
- Duty sharing: The private equity investment process, and due diligence activities in particular, are extremely time-consuming. These tasks can be spread across interested members.
- Managerial Involvement: The opportunity to join portfolio companies’ management teams and sit on companies’ board of directors.
In addition to the financial benefits for experienced angels, there are numerous social benefits associated with becoming an angel by joining a group:
- Networking: Connect with other high-net-worth individuals and thought leaders in your geographic locale.
- Aiding Entrepreneurs: Take an active role in helping entrepreneurs in your community to succeed.
- Shaping Industries: Use your experience to help develop the companies of tomorrow in your field of expertise.
- Staying in Touch: Learn about new technologies and ideas, and stay in touch with the entrepreneurial world.
- Enjoyment: Have fun evaluating opportunities and partaking in their success.