What are archangels?
Angel investors try and invest in different startup ventures. Some may succeed, and some may fail. Those that have a winning streak may eventually be famous and have a fortune. We call them archangels. We often encounter this term in the bible, and it refers to an angel with a high rank. The logic applies to the term archangel in investments. These are angel investors that became too successful that they earned such identification. They are wealthy people or entities that use their money to give startup businesses the capital they need to thrive and grow.
When we say archangel, other people might have a different idea. They can be external advisors hired by a group of angel investors to make due diligence and comment on business opportunities that the group can consider.
Let us start from the beginning.
We said that archangels are angel investors. But what are angel investors? They are seed investors and wealthy people who offer capital to startup companies with interesting early-stage ventures. The startup may have done something to get the attention of the angel investor. On the other hand, this offered capital does not come for free. Angel investors are also businessmen, and they would not show if they think that the startup will not give them something in return. They are expecting a higher rate of return compared to what common investments offer. How significant is this percentage? It is usually 25%.
Some angel investors are lucky or have keen eyes for promising startups that they are considered super angels or archangels. They invest in multiple endeavors that commercially succeed. Startups, as their name suggests, are fresh in the field. So, they make little to zero profit. They do not have that much capital as their competitors. So, they try to engage with angel investors to have a more sustainable cash flow and collateral. Angel investors give money for an equity position.
Now we have archangels. They are famous for flipping their investments immediately, and this action generates more money for them. They do not demand that much from companies, unlike venture capitalists who have a different barometer to measure the success and growth of a company they engage with. Venture capitalists will most likely demand a seat on the board of directors for a massive equity stake. In this case, there is more justice for the term archangel, right?
Why engage with an archangel?
We mentioned that some people refer to archangels when they talk about advisors. They can be relationship builders among angel investors. They leverage their power to bring them all together for transactions and deals. Archangels are known to always exit successfully, especially with multiple deals in return on investments. If an archangel supports one business, know that there will be more interest from the investment community. They generate the needed attraction to other investors to funding rounds. In fact, they don’t even have to attend the round if they already invested in a particular company. They can still connect owners who look for backers that have groups of probable investors.