What Is An Accredited Angel Investor? Here's What Technology Startups Need to Know
During the early days of your technology business, your initial funding may involve bootstrapping the company or perhaps raising money from friends and family. But at some point, you may need to raise money from third parties such as Angel Investors and/or venture capitalists.
Amid that funding journey you may hear the term Accredited Investor. That sounds fancy and professional. But in reality, it doesn’t mean all that much. The term "Accredited investor" is defined in Rule 501 of Regulation D of the U.S. Securities and Exchange Commission (SEC). According to that definition, Accredited Investors must have:
A net worth of at least $1 million excluding the value of your primary residence; or
income of at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
No Shortage of Angel Investors
Translation: Accredited Angel Investors don’t need to take any special educational courses, and they don’t need to carry any special certifications or specializations. As a result, there’s no shortage of Accredited Angel Investors for your startup company to engage. For instance, the Angel Capital Association spans:
15,000+ accredited angel investor members
250 angel groups, accredited platforms and family offices
30,000+ entrepreneurial companies in ACA member investment portfolios.
Clearly, it’s easy to find Accredited Angel Investors. What you’re really seeking is the right angel investors for your business.
How to Find the Right Angel Investors to Fund Your Startup Technology Business
As you navigate discussions and seek potential funding from angel investors, keep these points and questions in mind:
Is every member of the angel investor group truly accredited — with the proper financial resources to maintain a long-term commitment to angel investing?
Do the angel investors have a track record in your industry — with a clear understanding of your channel and go-to-market strategies?
Do the angel investors have a mix of business, technology, sales, finance, marketing and digital media experience that you can tap into?
Can the angel investors make introductions to key executives and influencers across your target markets?
Are the angel investors committed to a long-term relationship — including pro rata rights and potential follow-on investment rounds (Series A, Series B and beyond)?
With those questions in mind, you’re better prepared to determine if Channel Angels (or alternative angel groups) are the right fit — or the wrong fit — for your potential funding needs. Still got questions about Accredited Investors and how to find the right angels to support your business? Feel free to email me: Joe@ChannelAngels.com. Thanks in advance your your inquiries.