Halo Venture Capital
Halo venture capital is a reference to the growing popularity of angel investors in the venture capital marketplace. The halo is a direct reference to the halo of the angel, and has even been used by one noted company as its official name.
Angel investors prior to World War II were most often friends and family of the entrepreneurs who invested their own capital for business start up projects. The amount of equity and management control they demanded in return varied from investor to investor. They were playfully referred to as 3 F investors. This meant family, friends, and fools. Today, angel investors are not usually family or friends and they are certainly not fools. Halo venture capital is a term used to describe the investments of angel investors.
Angel investors differ from normal venture capitalist mainly in the fact that they invest their own funds, while the VC invests the funds of investors that have pooled their resources in a venture capital fund. The fact that the “halo investments” are private funds allows the angel investors to fund smaller companies that are usually below the deal limits of the venture capital fund managers. However, this does not mean that the angels are limited to smaller deals.
The angel investors are willing to take more risks, in fact, than the venture capital fund managers. Despite the fact that the very nature of venture capital entails accepting risk for potentially high return, the VC executives that manage the funds will still feel the restraint of responsibility that would not bother an angel investor.
The angel investor will also expect more operating control of the company. Many of the halo venture capital firms specialize in very early stage start up companies and provide assistance in setting up management teams. Since most of them are entrepreneurs themselves, they tend to want much more control of the company in addition to a strong equity position in it.
Angel investment is a growing sector of the venture capital market, and a very viable option for the entrepreneur with very good ideas and very little funding or assets. The fact that the angel investors will insist upon more control of the company is not seen as a bad thing. Many entrepreneurs with technological break through ideas are experts in the technology and amateurs in business managements. The angel investors are the experts there and they have the cash in hand to prove it. They may just be the angels that are needed to make an idea fly.