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Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms by Matthew R. Nutting, David M. Freedman

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CHAPTER 6

Angel Investors

Entrepreneurs are among the heroes of American free enterprise. They take big risks, defy convention, drive innovation, generate new jobs, and occasionally strike it rich. Angel investors, though not quite as celebrated, accelerate the growth of entrepreneurial ventures by providing capital and sharing the risk.

Our culture did not always celebrate entrepreneurs. In the 1950s, kids were advised by their parents to avoid risk: stay in college, choose a safe career, buy a house (and a cabin up north or down south), accumulate wealth, play golf or go fishing, and leave a big chunk for your heirs. Things have changed. Since the late 1990s, startups are where the coolest things happen, where disruption begins, and where fortunes of unprecedented magnitude are hatched. Risk became hip. Some of the most celebrated and wealthiest entrepreneurs, including Bill Gates and Mark Zuckerberg, are college dropouts.

If entrepreneurs are the glamorous engines of growth in our economy, angel investors are the first tank of jet fuel for those engines (and venture capital is the later-stage rocket fuel). The colossally successful enterprises that emerged since the microprocessor changed everything (beginning with Digital Equipment Corporation, or DEC, in the 1950s) could not have scaled fast enough—that being one of the requirements for success in the intensely competitive high-tech industry—without angel investors funding those startups in their earliest stages.

Until recently, ...

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