What is an archangel?
The term archangel refers to a successful angel investor who invests in a number of startups that have achieved fame and fortune as business successes. Angel investors are those with significant amounts of cash to provide startups with the capital they need to get their businesses off the ground.
The term archangel can also be used to describe an outside advisor hired by a group of angel investors to perform due diligence and provide advice on the business opportunities the group is considering.
- An archangel is an angel investor with an impressive track record making money from seed capital deployment to early stage ventures.
- While most angels are active and practical investors, they may sometimes need the services of an archangel (outside advisor) in areas such as legal and business development.
- An archangel can serve as a relationship builder between angel investors, leveraging their influence and notoriety to bring them together in deals.
Understanding the Archangels
Angel investors, also known as seed investors or angel funders, are high net worth individuals (HNWIs) who deploy their own funds to provide seed capital to promising companies in their early stages. They generally have a good amount of cash on hand and are looking for a higher rate of return (RoR) than traditional investments offer. These returns usually amount to more than 25%. Archangels, also called super angels, are investors who invest in multiple projects that end up being commercially successful.
Startups often make little or no profit and don’t have the same access to capital as their more established peers. In the absence of sustainable cash flow and collateral, sometimes your best option is to finance expansion through angel investors. These are people who inject money into the business in exchange for a capital position.
Silicon Valley, where many of the world’s largest tech companies started, is home to numerous archangels. While most angels are active and practical investors, they may at times need the services of an archangel or outside adviser in areas such as legal and business development.
Archangels sometimes have a reputation for quickly turning their investments around, creating more wealth for them. They may also demand less from the companies they invest in compared to venture capitalists, who use a different barometer to measure the growth and success of the companies they support and usually always demand a position in the company. board of directors in exchange for a sizeable stake. of equity.
An archangel can serve as a relationship builder between angel investors, leveraging their influence and notoriety to bring them together in deals. Archangels build reputations based on their successful exits, especially in dealing with many multiples in return on investment (ROI).
Since their presence offers them greater traction in the investment community, archangels may find themselves exerting the necessary influence to attract other investors to funding rounds. Even if the archangel does not participate in the round, but has already invested in the company, they can connect owners looking for sponsors with groups of potential investors.
The presence of an archangel in a funding round can quickly attract other sponsors to the deal.
An archangel may be known for helping other angel investors see positive returns on their investments by guiding them toward deals that are profitable for all participants. Later, other investors may seek their knowledge, as they have demonstrated a knack for choosing the right teams and companies in which to invest their money.
Archangels vs. Venture Capitalists
Despite the lucrativeness of their previous deals and the influence they have, an archangel might not be considered a venture capitalist (VC). This may be because an archangel continues to invest in early-stage companies, rather than the more mature companies that venture capitalists focus on.
Angel investors are generally willing to take the risks associated with a new company. In contrast, venture capital firms tend to get involved later, preferring to invest pooled funds once they have an indication of how much money the firm is capable of making.