Angel Domain Expertise Framework

Randy Hetrick shares insights on angel investing and why it's often the best form of early-stage capital for entrepreneurs.

Why Angel Investment is Optimal

• Non-dilutive capital (through sales) is always the cheapest source of money
• If taking dilutive capital, angel investors are the best source for early-stage companies

Key Benefits of Angel Investors

• Domain Expertise

  • Angels typically invest in areas they understand deeply
  • They can contribute meaningful value beyond just capital
  • Provides access to experienced industry professionals

• Investment Structure

  • Generally willing to invest via common stock
  • Avoids complicated preferred equity structures
  • Maintains team solidarity by keeping cap table simple
  • Recommended to avoid preferred structures until ready for significant equity sale or exit

• Engagement Level

  • Angels are typically passionate about the ventures they back
  • Act as pro-bono experts for the company
  • Actively excited to be involved in the business

Warning on Preferred Equity

• Once preferred equity enters cap stack, everything changes
  • Disrupts solidarity across team and investors
  • Creates challenging dynamics to manage
  • Most entrepreneurs find it difficult to navigate

Investment Scale Example

• Randy raised approximately $5 million from angel investors
• Completed several rounds of angel funding
• Company reached ~$30M in annual revenue before taking PE investment