Discover more from Oleksii Sidorov
6 types of angel investors—choose wisely
Why some angels are more welcomed on a captable and can receive better terms than others.
Let's start with the basics—an angel is a person who gives you money for a share in your business. Not a company or organization, a person. Usually, allocating their own money. That's it. No other limitations I can think about.
But if you're a savvy entrepreneur, you probably already know that angels, like any other investors, rarely bring value only in the form of money. In other words, angels usually add value beyond their investment, and you can categorize them based on that added value:
1/ Network angels
Well-connected individuals who can open doors and make the impossible possible through warm introductions. The average person may not know them, but those whom you want to reach do, and they're likely will be able to connect you. They mostly know other angels and VCs whom they exchange deals with. Which is not bad tbh.
2/ Ecosystem angels
Insiders who can help you with the dependencies which your business relies upon. For example, if you're working on Shopify, it would be good to have someone inside Shopify. Buying traffic from Instagram? A person from Meta can help with a blocked account. Creating an ad network? A media giant can help with reaching clients, and so on—anything that can strengthen the partnership side of your business.
3/ Optics angels
These people won't move a finger but will create a strong reputation solely by believing in you. These can even be split into:
3a/ Ecosystem optics
This one is simple. If you're making a yoga app, a famous yogi among your backers will certainly not hurt. Similarly, the founder of Spotify won't hurt if you're creating a streaming service, or an NFT whale who bought your token. For other people, this shows validation, and often that's all they need.
3b/ General optics
imagine two no-name analytics SaaS doing the same thing, but one is backed by Stripe brothers and the other is not. Which one is more attractive? Does Stripe have anything to do with analytics? Not at all, but it's a cool brand. Similarly, people take on a captable stars like Paris Hilton or Snoop Dogg. They don't help, but their names do.
4/ Operational angels
Often the most undervalued kind, who don't create a shining halo around themselves, but who can help with their experience in tricky everyday business problems. You can come to them with a question about hiring, managing the board, or entering a new market. They can be the same active founders a couple of rounds ahead of you, serial entrepreneurs, or people who have built large companies and now drink martinis on the beach and teach others.
5/ Expertise angels
They often get an advisory role because their unique expertise in a narrow field is worth more than money. Building a solar panel? Bring a well-researched physicist. Revolutionizing healthcare? Talk to an expert MD. Training new AI? A researcher from Google Brain may help, and so on.
6/ Money angels
These are people who simply believe in you and what you build not with their mouths but with their money. It's also a legit value, and their contribution to the startup ecosystem is hard to overstate. Especially when it seems like nobody believes in you.
And you guessed it, the best angels combine multiple of these characteristics in themselves, which is why they are the most desired and easily get access to the best deals.
I would like to attach some funny pic of angels with wings, but can only hear this in my head while writing:
What kind of angel would you be?
Subscribe to only deal with angels who are as interested in your business as you're interested in them, and share with friends or "gangster party line" will call you in 7 days. You can reply and tag me on Twitter—the only platform I will engage at.