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New Resource Guides Angels in Formation of Angel Groups

November 08, 2004

As the angel investment community continues to evolve from individual investors to sophisticated angel investment groups, the Kauffman Foundation and the Angel Capital Association (ACA) have jointly published a new guide designed to help angels form the most effective angel organizations for their communities.

Angel Investment Groups, Networks, and Funds addresses the decision-making process in forming an angel group, from evaluating whether a particular community can support an angel group to determining the best structure. The 158-page guide offers examples of organizational structures and management functions and provides critical documents such as membership agreements, funding options, term sheet samples and due diligence checklists for more informed investment decision-making.

To alleviate some of the risk and work in angel investing, angels have begun forming angel groups, the guide points out. About 200 such groups were active in 2003, up from an estimated 10 in 1996. The increase, the author says, represents an evolution of the angel investing market as individual investors find many advantages of working together – better investment decisions, enhanced deal flow, the ability to combine funds into larger equity investments, and group social attributes.

“Groups offer numerous advantages over individual angel investing, which is often time consuming and inefficient,” said author Susan Preston, member of the ACA advisory board and Kauffman entrepreneur-in-residence. “In addition, few if any individual angel investors possess all the skills and knowledge necessary to accurately and objectively evaluate an investment opportunity."

Data show angels provided an estimated $12.4 billion in business financing to an estimated 27,500 entrepreneurial businesses for the first half of 2004. This compares to $18.1 billion for all of 2003, which was nearly equal to the $18.2 billion provided by venture capital funds.

Angel Investment Groups, Networks, and Funds is targeted for those interested in forming angel groups and for entrepreneurial support professionals and community leaders looking to expand the financing resources available to start-up entrepreneurs. The guide also contains pointers for accredited investors interested in becoming angels. It is available at: http://www.kauffman.org/items.cfm/590

A second report funded by the Kauffman Foundation highlighting successful youth entrepreneurship programs also may be of interest to Digest readers. Entrepreneurship Education: Learning by Doing profiles six such programs in Chicago, Kentucky, Mississippi, Nashville, South Carolina and West Virginia, respectively. Conducted for the Appalachian Regional Commission, the report is available at: http://www.arc.gov/index.do?nodeId=19