When traditional VC firms refuse to lend, a start up turns to individual private equityinvestors known as "angels".?In addition to moneys, angels also bring expertise and experience to a start up and may serve on the board of directors or provide guidance through consultingor mentoring. Angels risk their capital based on their experiences andinstincts.?They tend to invest togetherwith trusted friends and associates or on the recommendation of serviceprofessionals. They are capable of investing quickly (30 60 days to a closing)and their due diligence can be less rigorous than VCs or strategicinvestors.?Angels may buy into conceptsof a business and be forgiving on valuation.?A single angel's participation in an investment usually ranges from$25,000 to $100,000. This informal investmentmarket tends to be regional ?Ottawa, Toronto and Waterloo. Angels are notlisted in directories and they are hard to find, thus, raising this type ofseed capital involves a costly and time consuming networking process forentrepreneurs.

Unfortunately, it isprecisely the non institutional nature of angel investing that creates theobstacles that entrepreneurs in search of capital must overcome. First, theangel market is highly fragmented. Angels do not operate as investment companies they operate as sole proprietorships. The angel usually invests hisor her own capital in one or two investments at a time. Second, most angelsrestrict their investments to industries they are familiar with or havecompeted in. As a consequence, the more innovative the product or industry, theless chance there will be of finding an angel willing to invest. Third, angelsusually like to keep a close personal watch on their investments, and theytypically will not invest in a company that operates too far away from theirhome. This can pose a difficulty for start up companies that are not locatedin major urban or investment centers such as Ottawa, Toronto and Waterloo.