An angel fund is a pool of capital raised from multiple angel investors to invest in early-stage startups. Unlike individual angel investors who invest directly, an angel fund operates as a collective investment vehicle, allowing multiple investors to contribute smaller amounts while benefiting from shared deal flow, due diligence, and risk diversification.
How does an angel fund work?
An angel fund gathers contributions from multiple angel investors and uses the pooled capital to invest in promising startups. Investments are typically managed by a lead investor or a fund manager, who selects deals, conducts due diligence, and negotiates terms. The fund may take equity in startups in exchange for funding.
How is an angel fund different from a venture capital (VC) fund?
The key differences between an angel fund and a VC fund include: Angel funds focus on early-stage startups and typically invest smaller amounts (€50,000 – €1 million). VC funds invest larger amounts (€1 million+) and often target later-stage startups with proven traction. Angel funds are funded by individual investors pooling their resources, while VC funds raise money from institutional investors, corporations, or large-scale funds.
What are the benefits of raising capital from an angel fund?
Startups benefit from angel fund investments in several ways: Access to early-stage funding without the stringent requirements of VC firms. Mentorship and guidance from experienced angel investors. A diversified investor base, which increases credibility and networking opportunities. Less pressure compared to VC investments, which often demand rapid scaling and exits.
How do angel funds select startups to invest in?
Angel funds typically evaluate startups based on: The strength and experience of the founding team. Market potential and scalability of the product or service. Revenue model and financial projections. Competitive advantages and industry trends.
Where can startups find angel funds?
Startups can connect with angel funds through platforms like AngelList, Seedrs, local angel investor networks, or startup incubators. Networking with industry leaders and attending pitch events also increases visibility to angel investors.
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