by Andre J. Peschong

What happened to the old school traditional venture capitalist?  You remember the ones that actually invested in ventures, ideas, untapped markets and people.  These venture capitalists have over many years turned into just capitalists or better yet bankers.  If you look at the landscape of venture firms who are looking to invest at seed or first round capital stages they have been reduced drastically. 
I do not have actual statistics on what the percentages are but if you are an entrepreneur looking to find capital at one of these very early stages, I think you will be hard pressed to find any interest.  There are certainly exceptions but for the most part the venture capitalists have trended toward later stage companies looking for larger amounts of capital that can be syndicated with a number of other venture funds so as to spread the risk.  In essence the venture firms are really higher risk bankers.  So where does that leave all these new companies with the next great idea or product.  Typically, it leaves the entrepreneur to raise a “friends and family” round of financing.  Basically the entrepreneur must pass the hat to people he knows such as family members, neighbors, friends or that one rich guy that everyone knows.  That is the current plight of the entrepreneur.

Now here come the Angels.  These angel networks typically consist of high net worth individuals who have had previous success in there own entrepreneurial ventures or were part of corporate America or anyone that understands the opportunity of investing early and intelligently.  Angel groups typically have a varied group of people with many different perspectives, which actually help when going through due diligence on a prospective company.  These angel groups are stepping in where the venture capitalists used to be and not only adding capital but more importantly adding dimension and contacts.  These are individuals who invest directly into a venture and not a fund that generates a management fee and carried interest, in essence these angel groups are the purest form of capital.