I am advising the company of a former colleague. During their process of fundraising they have come across a lot of people that called themselves angel investors. They even had on their Linkedin profiles the title of being an angel investor.
However, many of those so called “angel investors“ were only able to invest checks of USD $5,000 when the time of issuing the check came about. Why is this the case? Is this something normal? Or should we stay away from those that label themselves as such thing on social media?
In the US to qualify as an angel investor, one must have a liquid net worth of over $1million. People like this typically will write a check in the $50k range. People who are offering $5k probably aren't really certified angels.
Angel investors come in all shapes and sizes.
If someone is, for instance, a retired MD who has a total investible net worth of $1M, maybe they would only feel comfortable risking only 5% of that in Angel investments where there is a high chance they will lose their entire investment, since the rest of that $1M is generating all the retirement income they are living on. But 5% of $1M is only $50K. But they may want to diversify and invest small amounts in say 10 companies. That's going to be an average investment of only $5K each. As Reg CF crowd funding picks up, I would expect to see more of this kind of Angel Investor.
In contrast people with $10M in investments maybe feels like they can put $500K at risk and can do ten $50K investments. By the time you reach people with $100M in investable assets, you are really looking at the "Super Angels" who might be able to do investments of several hundred thousand dollars at a pop.
Because of this variability in investor "bite size", it is fully reasonable to very quickly ask them: What is the size of a typical investment, and how total "dry powder" do you have available to invest.
Angels are a legitimate way to raise money and they have been for some time. They are particularly useful at the very early stage where you don't have enough progress to get other investors, such as venture, involved. Angels' usefulness, interest,and funds are going to vary widely like most things. There are so many variables but generally I would expect checks in the $25K-250K range from angels. It would be painful to raise money $5K at a time (even at $25-50K, it can be hard) and you could waste a bunch of cycles trying to do so. You are right to be wary of titles, especially self-appointed ones. Titles don't always accurately characterize the people and theirskills and abilities. Just ook at who has one of the most prestigious titles in the world right now, POTUS. I would start with finding formalized angel networks in your area before looking for titles on LinkedIn.
Were the angle investors you've meet accredited investors? Did they belong to an angel investment club that provided training, pitch events, due diligence? I think that if you get into a more rigorous group (something like Colorado's Rockies Venture Club) that you'll have a more positive experience.
I avoid those who self label themselves as "Visionaries" more. I would filter out the riff raff by listing your fund rise on a platform such as Angel List or Crowdfunder whereby only "accredited investors" have access to your financial information but I also caution you not to turn your nose up at a $5,000 investor either. You get enough crumbs and you got yourself a cake my friend!
Particularly, my opinion is you dont have dedicate time, energy and effort for these profile. Is a very consumed time and wasted. Your focus is other.
I think you might ignoring one big important factor: Geography. Wealth is relative to the country one is. For example, a rich person in Nigeria, might be considered well of in the US, but certainly not a mogul. Therefor, yes, in Silicon Valley funding of -at least- 25$ K US might be the norm, elsewhere in the world, it is not.
The amount an angel can lend or invest will depend on his/her own wealth Likewise, investing 5$ K US in a company in Bolivia (for example), gives the company a similar boost that a 25$ K will give a company in the US.
Best of lucks!
The US SBA has indicated for YEARS the cap limit on real angel investors is only $250K. We have indicated on our 'Timelines' chart what the cap limit one can anticipate based on the category of capital. The only ones smaller then angel tend to be "seed" $50K and then "incubator" $20K. GOOGLE our free list of "Top 20 angel investors and the inconvenient truth"
As the meme says "Nobody knows you are a dog on the internet". There are many self-proclaimed "angel' investors. Some may invest <$25,000 for rational reasons, but often they simply have no risk capital. These are not useful because you want to have a group that can add to their investment in follow on rounds. You should set and enforce a minimum that makes the paperwork worth the cost and gives you some felling of their ability to follow on in the future (even if you do not need them). They are also more professional. So, do not discount people because they state they are angels, but make minimums clear. Use reputable platforms such as Fundable, Angel, Gust, and Crowdfunder that have done some vetting. Meet all the angel groups you can if nothing else but to practice the pitch.
5k checks ? wtf