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Angel investors: Who are they and how do you find them?

Kimberly Klayman of Ballard Spahr lays out everything you need to know about partnering with angel investors for your early-stage startup.

Angel investors can help your business get off the ground. (Photo by RODNAE Productions via

This is a sponsored guest post by Ballard Spahr. Ballard Spahr is a Ecosystem Builder client.

What are angel investors? How does angel investing work?

Angel investors are private investors that back entrepreneurs or startups in exchange for equity (or the promise of equity at a future date) in a company. Angel investors can be individuals who invest in companies for a living, but they are often high net individuals who invest in companies as a side project or to diversify their passive investment portfolio. Angel investors often have a background in business, but they may come from many different professions and backgrounds. While the exact amount of investment capital is unknown, some estimates suggest that there is approximately $24 billion in angel investment each year.

Angel investors are the most common source of funding for startups during the startup’s early stages and are often the types of investors startups seek for their “friends and family” rounds of financing. This is because angel investors are willing to accept the high risk of investing in companies before more established investors begin to invest in those companies. Investing early requires angel investors to take on more risk, but also allows them to seek more return.

This beginning phase of a startup is what’s called the seed or angel funding phase. The company could still be in its ideation phase, may be working on an MVP (minimum viable product), or have few customers/users. The company may be on the verge of an inflection point in its growth and will seek angel funding to help propel it to the next level.

Hot Tip: When talking to individual angels/high-net worth individuals about investing in your company, you should ensure that the investor is accredited. Accredited investors are investors that meet certain criteria under securities laws that permit them to invest in private companies.  One way to make sure the investor is accredited is by having the investor sign an accredited investor questionnaire that confirms how the investor is qualified as an accredited investor.

[Editor’s note: Check out’s Who Makes $200K? reporting series. The multi-part, data-driven series explores the intersection of race, economic mobility and tech careers with a focus on individuals earning $200,000 — the income needed to become an accredited angel investor — across comparable markets.]

What’s the difference between an angel investor and a venture capitalist?

Angel investors are high-net worth individuals investing their own money, while venture capital firms (VCs) are typically run by investment managers that invest other people’s money. Both angel investors and VCs fund companies in exchange for equity, or instruments that convert into equity, but angel investors are more likely to invest when the company is at an earlier stage of development. On the other hand, venture capital firms tend to invest in companies that are slightly more established.

Other than angel investors, what other investors fund startups?

Nontraditional investors encompass a wide range of investors in the venture capital space. This group of investors is growing quickly and substantially, as more investors become increasingly attracted to the emerging company space. Nontraditional investors can be mutual funds, hedge funds, private equity funds, corporations, and managed futures funds. These types of investors fund newer, smaller companies as a way to diversify their portfolios. Portfolio diversification and larger returns encourage nontraditional and angel investors to fund these emerging companies.

Corporate investors are increasingly investing in startups as a way to innovate or invest in new technology and/or as a way to partner with a current or potential customer or vendor of the corporate investor.

Advice from an angel investor

This is a quick tutorial with some hot tips around raising money from angel investors. In preparing the below, we spoke to angel investors for advice and feedback about how they like to meet founders.

Where to meet high net worth individuals that want to invest in emerging companies: One Philadelphia-based angel investor indicated that “a great way to meet investors is through founders that have successfully raised capital and have close ties to investors.” This investor also finds that “it is helpful to be at events, but even more helpful is using your resources to make warm introductions.” Warm introductions (by your advisors, service providers, accountants, lawyers, friends and/or family) increase the likelihood that investors will look at your deck and make an investment.

Once you meet an investor: Follow up! Send a note on LinkedIn and ask the investor if they are interested in your one-pager or learning more about your company. Be as specific as possible: Reference where you met them and what you are working on. You can determine how interested the investor is if they reply and seek further follow ups. One angel investor states that you’ll know if an investor is interested “if they respond and if they ask questions. … If they are not engaged, it is likely that your venture is not a fit for their firm.”

Read more advice on how to make sure potential investors are a good fit for your company.


Kim’s Korner is a series of articles by Ballard Spahr’s emerging company and venture capital attorneys. The column is not legal advice. The substance of the column is derived from our experience working with founders and details many of the current critical issues facing startups.

Learn more about Ballard Spahr
Companies: Ballard Spahr
Series: Kim’s Korner by Ballard Spahr

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