Angel Investors, What, Why & How: Part 1

When Campbell McKellar, 32, was beginning to raise money for her New York-based startup Loosecubes.com in July 2010, she received a piece of advice that resounded above all others: “Never set out to raise money for a product unless you really believe in it. Never take other people’s money unless you can look them in the eye and say, ‘we’ve got a shot to do something really big here and you should be involved.’”

Dozens of presentations later, it’s certain the wisdom fell on eager ears—and that McKellar’s belief in her business was the golden ticket to financing. Since July the tech startup has exceeded its first-round funding goals and is poised to announce its early success by the end of the month. Her investors in Loosecubes.com, which links offices with available workspace and workers looking for a place to rest their laptop, have to date included friends, family, venture capital firms and angel investors.

For many people, young entrepreneurs and small business owners included, the definition of an “angel investor” seems rather muddled. Are angels super-wealthy people who drop off much-needed bundles of cash and disappear? Or are they the dreaded controlling investor who feels that their contribution gives them the right to veto day-to-day business affairs? How much money will they give me? Will they invest in my coffee shop? What can I do to get in good with an angel investor’s checkbook?

The questions are many. And the answers, it seems, are quite clear if you ask the right people. To get to the bottom of the angel investor issue, I spoke with experts this week, from B-school professors to Angel Superfund investors to young tech entrepreneurs. We spoke with one goal in mind: to help young, struggling or aspiring startups to better understand what an angel is, and how best to position themselves for a mutually beneficial (read: profitable) relationship. For Forbes, I’ll tackle them in three parts. First up: What is an angel investor, and is their money right for my business?

By MEGHAN CASSERLY

Full Story: http://blogs.forbes.com/meghancasserly/2010/09/16/angel-investors-what-why-how-part-1/