You often see advice on picking your VC. I've written often about this topic. Yet you hardly ever see much about angels. Sure, it's even harder to get angel money than it is venture capital. But nevertheless, you should always consider the consequences of raising money and the person who gives it to you. It may have longer lasting consequences than you ask for.
I've been noticing quite a few "spats" over the last couple of months, very often involving business angels or something having to do with them. I'm sure this is nothing new but it's become quite obvious as of late. Lots of angels are in a poor situation be it because of the recession or poor investment decisions in the past. Actually, it's probably both but some have it worse than others (kind of like the VC's). Those angels who pursued "spray & pray" strategies have a lot of investments which they will never realize a return on. This makes them quite nervous and also unpredictable in your decision making process. If nothing else, they are so busy firefighting that they simply won't have time for you. In general, very nervous or preoccupied investors never make for good support. Oftentimes, in-fighting breaks out which does nothing but deter your start-up from being successful. It also becomes an every man for himself situation and this obviously isn't optimal. Early on, you need all the focused help you can get.
Even worse is that lots of angels have been burned. For example, here in Germany you have at most a 10 year phase now of visible angel investing. There were angels before but these were mostly high net-worth individuals who dabbled here and there, usually within their industry (typically not tech if 10 to 15 years ago or earlier). In the late 90's though you had lots of folks making quick money on the bubble. Many of them went into angel investing thereafter. Actually, I hardly know of any entrepreneurs who exited back then who didn't do some form of angel investing after a successful exit. These weren't necessarily highly experienced managers. They were out to make a buck and didn't necessarily play fair. After what is now a fairly long period, many have already been weeded out. Yet, quite a few remain and due to their behavior they may be caustic to your fundraising process. You definitely need to avoid this as there is nothing worse than not getting meetings with investors simply because of whom you have in your investor syndicate.
There are great angels out there. I am happy to have seen many of them establish themselves over the 10+ years I've been in venture specifically here in Germany and in general in Europe. These are the guys from whom I receive a majority of my dealflow. They are out there and if you talk to VC's, you should ask them who they know and like. I quite often steer really early stage guys to angels whom I respect. This is a win-win situation as they get a good deal and I know down the road, I may have a better chance of investing in that business. In general, business angels aren't necessarily the easiest people to find and approach. If you ever are planning on launching a business with angel money, start the process early of identifying them and finding out how they tick.
