What Keeps 750,000 Accredited Investors from becoming Angel Investors?

What Keeps 750,000 Accredited Investors from becoming Angel Investors?

Karen Rands, covered this topic on her Compassionate Capitalist Radio Show recently.

In a nut shell….lack of knowledge — The men and women who are earning over $350,000 a year in income, as tracked by Census and the IRS, are likely executives in a large company or run small to medium size businesses.  They didn’t make their money in a venture backed high tech company and likely aren’t part of a company that raised capital to get started, or if they are, they weren’t part of the team that founded that company.   They aren’t being encouraged to invest in private companies by their financial planner.  For the most part they aren’t even aware of “angel investing” as a wealth creation strategy and may not know that stock of private companies are available to purchase before they go public.   They are the ones that try to “get in on” the first issue of public stock for the hot company they are hearing about.  They are sophisticated investors so like the idea of having their money work for them.  That is why they often invest in real estate.  Yet if they knew they could apply the same practice they use to decide if a property is a good investment or a public stock is a good buy to the decision to purchase equity in a private company, and have the opportunity to own a % of multiple entrepreneurial endeavors with strong potential, they would choose to include that as part of their wealth accumulation strategy.

According to the US Census, there are an estimated 1,150,000 households that earn over $350,000 a year. Furthermore, there is an estimated 250,000 active angel investors involved in structured groups and actively considering investment in early stage companies as a means to create wealth in their diversified portfolio. And if we assume there are at least 150,000 of the wealthiest that have too much money to be angel investors…they don’t invest directly into companies, they invest in the funds that fund the companies. That leaves an opportunity for the remaining 750,000 to become angel investors.

Listen to the Podcast for the full report.

Whenever there is a shift in the market, there are key factors that trigger it and contribute to a successful shift.  The 3 A’s of Market Movement:

  1. Awareness
  2. Adoption
  3. Access

Awareness of the potential to invest in a high growth company before it goes public or grows in value to attract an acquirer is growing as “crowd funding” news continues to spread around the internet and in the general press.  With the advent of the Jobs Act of 2012, “crowd funding” became a common term bantered around, often within the wrong context, but none the less a phenomena that people were talking about.  Wealthy men and women who consider themselves “sophisticated investors” with an  above average Financial IQ are curious about this as a new “hot” investment platform.  Yet there exists a cloud of confusion around “crowd funding” because although passed by Congress and signed into law by the President, the sale of securities is regulated by the Securities Exchange Commission (SEC).   As of this writing, the SEC still has not issued their rules for the Title III part of the Jobs Act that specifically addresses  how companies will do equity crowd funding at a national federal level.   Currently 4 states offer specific legal guidance and approval for companies incorporated in their state to raise money from investors in their state via crowdfunding methods- Kansas, Georgia, Michigan, and Wisconsin, with Washington, Alabama and South Carolina considering legilsation.   Companies are permitted through Title II to raise capital from Accredited Investors under the Reg D 506c and Reg A, under specific conditions, and market to them via the same means that companies use in rewards based crowd funding.  Learn more about history and status of crowdfunding.

As this community of sophisticated investors who would easily qualify as “accredited investors” via the certification process by providing copies of their W2 or past tax filings become aware of the opportunity to invest in private companies they must learn to adopt the mentality of an angel investor.  Angel investors think differently than regular investors who are simply wealthy.  Angel investors have to have vision and imagination.   Entrepreneurs seeking angel investment must be able to cast a vision that the potential angel investor believes can be a reality.  They must imagine the potential results that the management team will be able to produce with the product and strategy they are offering that is at the core of their investment opportunity.  If the entrepreneur is successful in conveying that story and it is better than the one the investor just heard or will hear the next day, then they will be the lucky one to get that angel investor’s money.   Traditional investors look at the history of a public stock to anticipate a trend, the market comps on a real estate to predict a trend… all with the intention of buying low to sell high.  None of that really exists with private companies.   That is where an investor has to “think outside of the box” and think about the company beyond just what has been done so far and grow to understand that buy adding private equity investment to their portfolio they have an opportunity to produce a greater return…if they don’t lose the entire investment.   Investment in private companies is by its nature very risky.   It is an illiquid investment and sometimes the return doesn’t come for many years down the road.   So as sophisticated investors adopt private equity investment in early stage companies as a strategy to grow their portfolio, they must also be extremely patient.  They also must take the time to learn about the legal requirements to make this type of investment.

With knowledge that they can own pieces of many companies, and the desire to become an angel investor, all that is left is access to the deals and the due diligence.  Traditional angel investors join groups that help with the screening and due diligence process. Committees are formed to screen deals so only the best get a chance to pitch to the group at large.   Committees are formed to conduct due diligence on the company and report back to the group of investors so they can decide to participate in a pool of funding for that company.   They may have an obligation participate on a committee periodically and to attend the monthly pitch meetings and follow up meetings.  They can spend this time because they typically don’t have a day job.  They are wealthy because they had an exit from a company or an investment that provided them with disposable income to invest.   They “self certify” in traditional angel investments so as to avoid full disclosure on their actual net worth and sources of income.  The 750,000 accredited investors we are talking about here, that are void in the marketplace now, are too busy to participate in those groups and participate on a committee that requires time, even if the group is actually located in the city they live in.  They have access to public stocks through stock portals to do the research and trades whenever they want, 24/7. They have real estate agents find them investment properties.   Their financial planner won’t find them private company investment opportunities because of the rules they have to adhere according to FINRA.  So gaining access to a variety of opportunities to consider that also have full disclosure and due diligence information available is critical as the final trigger in the market shift.

Kugarand Capital Holdings, LLC is launching a secure portal to provide the opportunity and the due diligence necessary for this type of sophisticated accredited investor.   The 22 year old NBAI is being transformed into The National Network of Angel Investors comprised of small regional groups forming virtually around the country based on regional or special interests.  Education is provided on an ongoing basis through articles, white papers, podcasts and videos.  Sophisticated Accredited Investors seeking to understand how to become an Angel Investor…how to adopt the mentality, but also learn the ropes of being an angel investor… applying the knowledge of stock market and real estate investment to private equity investments will purchase the book “Inside Secrets to Angel Investing” as their road map.

Are you an investor that is tired of the volatility and unpredictability of the stock market? Are you frustrated that you have little influence to affect the management or operation of that public company? Have you realized that the public stock market is actually pretty risky and the overall return on investment isn’t that great? Then the time is now to participate in this market shift….  Then learning how to invest in private companies, purchasing shares in a company before it goes public, while the valuation is still low, could be the wealth creation strategy for you.   Tune in to learn how to join the world of compassionate capitalism

Find us on Facebook:  https://www.facebook.com/thenationalangelinvestornetwork
Follow us on Twitter: https://twitter.com/nnoai

The National Network of Angel Investors

What Motivates an Angel Investor to Join an Investment Group?

Compassionate Capitalist Talk Radio: Each angel investor group offers different benefits to high networth individuals that understand the benefit of investing in early stage companies. Understanding their motivation helps entrepreneurs decide which groups to pursue as help those building angel groups understand how to attract members.

Investors will join a group for the community and social aspect as much as the business purposes.   For business purposes it is to see better deal flow, share the burden of due diligence, and have greater leverage in negotiating the terms on the deal.   Investors need to understand the structure of a group they are joining.  In some groups they all make individual decisions and others they make group decisions.   In some groups they pool their funds and have capital calls, and so the investor is very passive in the decision process but can add on their funds.   Investors wanting to join a group should understand these aspects of a group and any entrepreneur preparing to present to a group should find out what their decision process is all about.  

This radio show, podcast, explores the different types of groups and the motivations for angels that join those groups, and also what entrepreneurs should expect when pitching or meeting with those groups.

Listen Now!

Check out these investment websites: www.kugarandholdings.com, www.angelinvesting101.com, www.NationalNetorkofAngelInvestors.com

How to Create Wealth through Angel Investing

Angels are the financial fuel of the economy. Before Venture Capitalists get involved, before banks will loan a company an unsecured note; Angel Investors provide the capital that fuels the entrepreneurial spirit and helps inventions become products and ideas become reality.  They take the greatest risk, but also have the potential to reap the greatest rewards.   The return on investment for an affluent person who invests in a company at the early stage can be as much as 10 or 20 x.   The original investors in Microsoft, Amazon, Google, and even traditional non-tech businesses like Home Depot all made huge returns.  The logic behind it is quite fundamental….buy low, sell high.  But unlike buying a public stock at say $1 a share and it going to $20 a share are rare.   When an investor buys a private company’s stock at an early stage of their development, the likelihood of that stock increasing to reflect the growth in value from a start up to a revenue producing profitable company is much more likely to go from $1 privately to $20 as a public offering.

I like to refer to Angel Investors as Compassionate Capitalists. “Compassionate” because they have figured out that even though they can lose all their money, by providing investment capital to an entrepreneur with passion and purpose to see his or her company succeed, they are providing a hand up, not a hand out, that will fuel the economy by creating jobs and potentially whole markets by bringing innovation to the market. “Capitalists” because they aren’t donating to a charity, they are investing in a risky venture that banks won’t loan to and venture capitalist won’t even look at, with the intent of creating a big return on their investment. High net worth men and women become angel investors to create great wealth, never with the intent to lose money.

Angels are wealthy individuals who provide seed capital and growth capital to companies in the start up and early stage of their company’s life cycle. Their capital can be offered in exchange for equity in the company or as some specialized form of debt facility. Investing in this stage of company is the most risky, but it can also be the most rewarding. Rewards come not just from the financial returns, but also from experiencing the purest form of capitalism…bringing value to the market by supplying a product or service to satisfy a market demand. There is a definite sense of pride and accomplishment from being able to say you were an early investor in a block buster like Microsoft or Starbucks, and surprisingly, there is little regret from the early stage investors in the near misses like WebVAN and PETS.com because they got their sizable returns when those companies went public. It was the investors that followed the advice of their stock broker or financial planner to invest when those companies went public that saw a decline in the value of their investment because they bought at “retail” hoping that the value would increase over time. Angel investors buy stock when the company is still private, and reap their rewards when the company then sells that stock to another buyer or to the public stock market. They learned early in life that profit is made when buying at wholesale and selling at retail. That is how it works for the wise angel investor.

Investing or buying Private Equity of early stage companies is one of the secrets the wealthy use to create more wealth. As Robert Kiyosaki wrote in his best seller book, Rich Dad’s Retire Young, Retire Rich on page 127:

“the rich invest in shares of a company when the company is still a private company”.

To become a successful angel investor, it is important that individuals learn how to identify and screen opportunities for early stage private equity investing. In the eBook Series “How to Be an Angel Investor”, investors are taught how to take what they know from investing in public stocks and real estate and apply to making investment decisions about private equity investments.  You can subscribe to free excerpts of those books by going to this web page:  How To Be an Angel Investor

A survey of active angel investors revealed a startling and little known fact.   Most angel investors learn how to be angel investors by losing their investments….learn by doing and losing!  Oops won’t do that again. Investors can take classes on real estate investment and stock market investment, but rarely is there a class on angel investment.  Some new investors are fortunate if they have a mentor that will lead the way or if they are near an angel group that they can join to provide an environment to identify, vet, and co-invest with.  Many more potential investors are not located in an area where there is an angel investor group or they don’t want to be tied down to the commitments of a group.   The Center for Venture Research of New Hampshire University found in their survey of angel groups, 66% of the angel investors that could invest, didn’t.   They were called “latent” investors.  Here they are, part of an angel group, with full intentions of making investments into early stage and start up companies, but don’t actually stroke the check.  Why? It doesn’t make any sense until you learn that they hesitate because they are unfamiliar with the process.  Buying a public stock is easy….just call your broker, or go online and point and click.  Buying private stock involves signing paperwork; not really sure what you actually bought; how to measure the growth in value; when do you get to sell; do you get a piece of paper like a stock certificate for your $30,000???? and so on.   Even though broker/dealers are the ones authorized to sell private stock, most don’t because their costs to the companies are prohibitive for a pre-revenue company, and they discourage their wealthy clients from making those types of investments because of the fear of the SEC slapping them with a “selling away” charge and yanking their license.   What is a millionaire to do?

The ebook series described above was written for this very purpose.   Years of research, volumes of information, and scores of books were summarized for the consumption of a millionaire wanting to learn how to be an angel investor.

Karen Rands 2010 Kickoff of the Compassionate Capitalist Radio Show!

Karen Rands kicked off the first Compassionate Capitalist Radio Show for 2010 with an overview of industry predictions regarding sourcing of early stage business capital for innovative start up companies and emerging growth companies. This is the dawn of a new decade and there seems to be a lot of optimism regarding the rebounding of investment markets. This segment will cover the availability of seed capital, angel capital, venture capital and alternative finance based on Ms. Rands’ economist background, market research and practical experience in working with entrepreneurs and early stage capital investors on a daily basis.

The University of New Hampshire reports in their Venture Capital Research Report that angel investment is down significantly year to year, more companies are looking for money, less are getting capital and of those that get capital, they are getting fewer dollars.   However, the National Association of Venture Capitalists started the year with optimistic reports on investing and likelihood of investing.   Venture Capital firms saw an uptick in investment as 2009 drew to a close setting the stage to bring forth the capital in 2010 that not only helps companies survive and thrive, but also brings comfort to those angel investors that hesitate to invest due to worry that the next round of finance may not be there to help the company they invest in survive and thrive.

Listen to Karen’s Commentary Now!

Check out these investment websites: Karen’s twitter page: @Karen_Rands, www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.entrepreneurblogspace.com and www.dothedeal.org Listen, Learn, Enjoy and Share with a Business Associate!

Compassionate Capitalist Radio: Art of Raising Capital

Karen Rands shares with entrepreneurs the Art of Raising Capital. Raising capital for a business is not a skill we are born with. We need to develop those skills to raise seed capital, and yes venture capital. Tune in to learn the key elements necessary to effectively raise capital. This episode is a taste of the full course “The Art of Raising Capital” offered by LAUNCHfn.

If you like to attend “The Art of Raising Capital” on December 15, 2009, visit our web page (http://launchfn.com/id337.html) and register as soon as possible. Only Limited Space available.

Listen to The Art of Raising Capital Now!

Check out these investment websites: Karen’s twitter page: @Karen_Rands, www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!

Taxes Should Not Effect Angel Investors, according to Home Depot co-founder

One of the co-founders of Home Depot, Ken Langone, is a great testament to how great wealth can be created through early stage venture capital investing and angel investing.   Although the riskiest of investment types, it also can have the greatest reward–both financially and personally.    As Home Depot folk lore plays it, it was as a result of Ken Langone’s personal investment and calculated risk to bring in other investments into Home Depot when they were still somewhat unproven that financially fueled their growth from their first location to the point they could attract institutional financing.

Fast forward a few decades and Ken has gone onto create tremendous wealth, primarily as a result of his continued investment in early stage companies.   He is a true Compassionate Capitalist(tm) because he invests time and money to bring innovation to market and create jobs.   As he stated in his interview on Fox News recently, he doesn’t let a tax consequence determine whether or not he is going to help an innovation get to market that could solve a problem or improve the way business is done.   If he can see the benefit, make money, so what if the government wants a piece of that, he still made money and the he is pleased the innovation got to market and the jobs were created.

Back story Press Release with Ken Langone’s bio.

Chad Pittman, CRC Homes SPEC 2009 Presenter

Karen Rands interviews another SPEC Presenter entrepreneur!

Chad Pittman of CRC Homes is making an investment in communities in America! With every great crisis comes great opportunity. CRC believes that the current economic situation presents our country with an opportunity to rebuild itself on a foundation of solid financial planning. For so many the American Dream seems to be slipping away, but now is not a time to give up hope. Chad shares your successes and insights in real estate. www.crchomes.com

Listen Now!   Chad Pittman, CRC Homes SPEC 2009 Presenter

Southeast Private Equity Conference is coming April 14th and 15th. Hear from the innovative companies that will be participating, speakers, investors and other attendees. SPEC is the only event of its kind that brings together investors and early stage companies seeking angel investment or their first institutional VC (venture capital) round of investment. Get all the information about attending as an investor, entrepreneur or sponsor at www.sePrivateEquity.org

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, www.entrepreneurblogspace.com and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!

Angel Investors, down but not out — some bright spots

There is so much discussion and knashing of teeth about the void of angel investors in the market right now.   Frankly, I think it is a convenient excuse for those investors that weren’t actively investing in 2008 and therefore continuing to not invest in 2009, but were still “in the game” attending events, considering deals, requesting business plans, but ultimately being an empty suit.   We saw this a lot right after the dot.com burst.   It took probably a year and half before those “walking dead” finally faded away or got to the point of making an investment.  Unfortunately, you can never really know who these decoy investors are (see my blog on that topic on www.entrepreneurblogspace.com) until you have fully engaged and wasted time and probably some money with them.   Likewise, a company that is struggling to raise capital, but has a fundamental flaw that they are unwilling to address, either out of arrogance or ignorance, can use the current economic climate as their excuse…”oh woe is me, nobody wants to invest, boo hoo, because the economy is bad!”   We talked about the available capital in my radio interview yesterday with Bank President, Chuck Lewis of One Georgia Bank and Angel Investor and Fund Manager, Ian Adlington of Newport Capital and the Kereitsu Forum.    These gentlemen are two of the panelists will be kicking off the second day of events at the SE Private Equity & Capital Conference (SPEC) on April 14th & 15th…..hurry if you are a company seeking capital or investors seeking innovative companies to consider investment with.

 

Some Highlights of Positive Indicators in the Angel Capital Markets:

Angel investments dropped in 2008 by 26.2 percent over 2007, but the number of deals was relatively unchanged, with 55,480 entrepreneurial ventures receiving funding, according to the 2008 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire.  Full Report:  http://www.newswise.com/articles/view/550514/

Also Angelsoft, as the software used by hundreds of angel investor groups, keeps excellent statistics on trends. http://angelsoft.net/industry/index.seam  We have been hearing of companies getting funding in odd places…mid west, southwest, of course the west coast.   Although the due diligence process may have taken a few more months than usual, they still closed on funding when the regular capital markets and stock markets were at their all time worst.   Just take a look at this impressive list: http://angelsoft.net/funding-stories/ 

This news in encouraging to us.  It should be encouraging to entrepreneurs out there seeking capital….good companies with good business models and good management team, and appropriate valuations, get funding.   We are more committed than ever to make the upcoming SE Private Equity & Capital Conference (SPEC) more successful than ever with exciting innovative companies on the agenda and a convergence of angel investors, VC, fund managers, and investment bankers from accross the US.   We believe we can be Economic Architects by creating a rich environment for deals to get done, jobs to be created, and delivering innovation and wealth to the market.

SPEC Talk Radio: Are Angel Investors Investing?

SPEC Talk Radio brings together the entrepreneur and investor community to learn about how to create wealth through investment in high growth private opportunities. On Wed 2/11 over 25 investors attended the NBAI Investor Forum to meet companies seeking capital and this show will cover the outcome of that meeting. Hear from the investors and entrepreneurs that attended that event and hear for yourself that good companies can still generate interest from active angel investors. Next chance for companies to connect with capital is at the SE Private Equity Conference on April 14th and 15th. www.seprivateequity.org

Fernando Mera www.miasventures.com, Larry Hamilton GraphixWrap www.kornerkeeper.com, Tia Severino www.aid4autism.org,

Listen Now!  Are Angel Investors Investing?

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!

Bumper Music by Bryan Hunley of New Whyne Music

SPEC Talk Radio – Leading Edge Companies Path to Success

SPEC Talk Radio brings together the entrepreneur and investor community to learn about how to create wealth through investment in high growth private opportunities such as the companies that will be interviewed in this segment before the present at the NBAI Investor Forum on 2/11. Angel Investors tune in to hear about the next great market innovators. From technology to consumer products, there are ways to beat market returns with private equity investment.

Karen Rands interviews Steve Andon with One Pak (www.onepak.com) and Peggy Fisher with Tire Stamp (www.tirestamp.com)

Listen Now!  SPEC Talk Radio – Leading Edge Companies Path to Success!

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com, and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!

Bumper Music by Bryan Hunley of New Whyne Music