A history of angel investing
The first check came before the asset class.
The word is older than the industry that uses it, and it started somewhere with no returns in it at all. What follows is where it came from, what it was for, and why this fund is built the way it is.
Before it was finance
It was a theatre word first.
The money existed so the show could open.
An angel put up the money for a Broadway production and was repaid only if it ran. If it closed in a week, nothing came back. Nobody called that an asset class and nobody was buying exposure to theatre. Somebody wanted a show to exist, and without the money it would not have.
The bargain travelled with the word when finance borrowed it. That is the part worth holding on to: the money arrives first, before there is anything to value, and it is repaid only if the thing works.
Van Osnabrugge and Robinson, Angel Investing, Jossey-Bass, 2000. United States figure. The standard account across the angel investing literature. No primary record of a first use was verified for this site, so it carries no date.
Somebody counted them
Until 1983 nobody knew this money existed.
A professor in New Hampshire went and asked.
William Wetzel at the University of New Hampshire interviewed 133 private investors across New England and published Angels and Informal Risk Capital. It is the first use of the word to mean somebody putting their own money into a company no institution would look at yet.
He founded the Center for Venture Research, which has counted the US angel market every year since. Before it, the size of this market was a guess.
Read the title again. Risk capital, in a paper about people who expected to be paid back. The finding was not that these investors were indifferent to money. It was that they were reaching companies the institutions had not reached, and that nobody had been counting.
Wetzel, Angels and Informal Risk Capital, Sloan Management Review 24(4), 1983, and Sohl and Harrison, Venture Capital 20(3), 2018. University of New Hampshire, Center for Venture Research. United States figures. Popular accounts date this to 1978, the year the fieldwork began. The memorial written by his successor at the Center for Venture Research dates it to the 1983 article, which is the published record.
Why angels organised
Venture capital grew out of the first check.
So the people writing it organised themselves.
In 1994, Hans Severiens invited twenty five people to dinner in Menlo Park and twelve came. The Band of Angels formed because venture firms had raised larger funds and could no longer justify the smallest check on their books. The gap that opened underneath them is the gap angel groups were built to fill.
From about ten such groups in 1996 to more than three hundred by 2013. A group adds shared deal flow and shared diligence, which account for most of the difference between a good result and a bad one.
Band of Angels. Angel Capital Association. United States figures. The claim to being first is the group’s own. The earlier counts circulate through association materials and contemporary trade press. No single primary series was located.
What happened next
The money professionalised and it concentrated.
The people did neither.
of the growth in the US innovation sector between 2005 and 2017 landed in five metro areas: Boston, San Francisco, San Jose, Seattle and San Diego. The other 343 metro areas lost share
of American angels live outside Silicon Valley, New York and Boston, and they write larger checks than the ones who live inside: about $37,000 against $32,000
active angel investors in the United States in 2023, up 14.8 percent on the year before even as the total dollars fell
invested by angels across the United States in 2023, into 54,735 ventures at an average of about $339,000 each
Innovation growth collected in five metro areas while most of the people funding the first check went on living everywhere else, writing larger checks than the ones who moved. The money organised itself around a small number of places. The instinct it came from never did.
Atkinson, Muro and Whiton, The Case for Growth Centers, Brookings and ITIF, December 2019. The American Angel, Angel Capital Association and Wharton Entrepreneurship, 2017, from 1,659 accredited angels. University of New Hampshire Center for Venture Research, The Angel Market in 2023. United States figures.
What the first check does
It decides whether the company survives.
This is the closest thing this field has to a controlled test.
Researchers took the companies angel groups funded and compared them against the companies the same groups came close to funding and passed on. Two sets of companies that looked alike to the people deciding, separated by the decision. The funded ones did 30 to 50% better on survival, later financing, employment, patenting and growth.
That is what the money is doing before it does anything else, and it is why the first check is the one worth organising around. A company that gets it exists. A company that does not may not.
Kerr, Lerner and Schoar, Review of Financial Studies 27(1), 2014. United States figure.
And the returns
Returns were never the whole reason.
They were also never nothing, and this page will not pretend otherwise.
Angels have always expected to be paid back. Wetzel called it risk capital because that is what it is. Anyone who tells you this is charity is selling you something, and the numbers underneath it are unsentimental: 52% of individual exits returned less than the capital invested, and the median American angel holds 7 investments when the arithmetic of this asset class wants roughly fifty.
Returns were never the reason the money showed up first, and that is the narrower claim this fund is built on. A Broadway angel funded a show so it could open. Wetzel found people backing companies no institution would look at. The Band of Angels organised around the check venture capital had grown out of. In each case somebody decided a thing should exist and put money behind that decision before anyone could tell them what it was worth.
Wiltbank and Boeker, 2007, Kauffman Foundation and Angel Capital Education Foundation. The American Angel, Angel Capital Association and Wharton Entrepreneurship, 2017. United States figures. Gross, before fees, and survivorship biased: these studies observe exits and cannot see the investments that never reached one. Growth ventures only.
Where this leaves us
Georgia Angels is built to do the original act.
First check, every county, every industry, and the founder carried through the end if the company does not work.
- We intend to write first, into companies no institution has looked at yet. That is the act the word was invented for, and we have not written a check yet.
- We run the state as six territories and Atlanta is one of them, because the people who do this have always lived everywhere.
- The instrument fits the business, so a company that will never be sold is still fundable. Angel money stopped being able to say that when it organised around exits.
- Returns matter and we report them. They do not decide alone, and the scorecard says so before any money moves.
Nothing on this page is an offer or a projection of any return. Investing in private companies carries a real risk of losing everything you put in.